major macro economic indicators
|2014||2015||2016 (e)||2017 (f)|
|GDP growth (%)||3,8||3,2||2,6||3,8|
|Inflation (yearly average) (%)||1,0||-0,3||0,2||2,1|
|Budget balance (% GDP)*||-5,4||-1,2||-4,3||-5,0|
|Current account balance (% GDP)||-10,7||-5,7||2,1||0,4|
|Public debt (% GDP)||51,2||48,2||48,4||50,6|
(e) Estimate (f) Forecast
(1) excluding grants
- Significant public investment in infrastructure and telecommunications
- Attractive mining, hydroelectric and agricultural prospects for investors
- Discovery of oil reserves off the coast of Guyana
- Member of CARICOM (Caribbean Community and Common Market)
- Reliance on production of gold, bauxite, sugar, rice and wood
- Shortcomings in infrastructure, transport, education and health
- Exposure to climatic variations
- Territorial dispute with Venezuela
- Reliance on international creditors
- Growth of the shadow economy
- Criminality linked to drugs trafficking in the context of poverty and corruption
Stronger growth in economic activity in 2017, supported by an increase in gold production
In 2016, the growth of Guyana's economy slowed again as a result of falling production of rice, sugar and livestock, and the decline of the construction and manufacturing sectors. However, the operation of two new gold mines, which began production in late 2015, made a contribution to growth of around 1.7 points of GDP in 2016. The overall upswing in gold prices supported the rise in production. In 2017, production seems set to stabilise at a high level and should support a rise in growth. The performance of other sectors, linked mainly to the agriculture sector, should improve thanks to more favourable climatic conditions. Low external demand, in a context of high tensions with Venezuela, may limit the contribution the agriculture sector makes to growth in 2017. The implementation of projects as part of the Public Sector Investment Programme (PSIP) should help drive the construction and manufacturing sectors. Under this programme, the government will pursue its ambition to improve transport and telecommunications infrastructure and renewable energy projects.
Close to zero in 2016, inflation may rise slowly with the increase in energy and raw materials prices. Buoyant civil service salaries should also help boost domestic demand.
A budget in deficit, a current account balance in surplus
In 2016, the government softened the fiscal austerity policy it had implemented in 2015, increasing the budget deficit. In 2017, the deficit seems set to rise as the government is eager to accelerate implementation of the PSIP. The government has set aside nearly 150 million euros to reduce the deficit in infrastructures, to which will be added the costs of implementing a series of renewable energy projects. Health, education and security spending will remain high. In addition, 41 million euros will again be transferred to the state-owned sugar production company GuySuCo, bringing the total injected into the company to more than 145 million euros since 2015. The rise in spending will probably not be offset by tax receipts, which look set to remain stable. The imposition of VAT on water and electricity bills would be a way of compensating for its two-point reduction. The government hopes to increase receipts through better collection of corporate tax (accompanied by a reduction in the basic rate) and income tax.
In surplus in 2016, the current account balance should remain in the black in 2017. The current account surplus will probably shrink as oil prices gradually rise. However, gold production and gold prices should continue to support exports of goods. The loss of rice exports to Venezuela might thus be largely offset by a rise in gold exports. The discovery in 2015 of a large offshore oil deposit by Exxon Mobil might eventually help to reduce fuel imports, which constitute the main negative contribution to the trade balance. Reliance on foreign services will keep the balance of services in deficit. The current account surplus should help increase gross foreign currency reserves, which accounted for around 4 months of imports in 2016.
Domestic political dissent cools down, revived dispute with Venezuela
After over 20 years in power, the People’s Progresive Party/Civic lost its place in the multi-ethnic coalition led by the A Partnership for National Unity and Alliance For Change parties at the general elections in 2015. Parliament then named David Granger as head of the government. Despite a one-seat majority, David Granger seems better placed to govern the country than his predecessor's coalition government. However, he will be hindered by the continuing ethnic divisions (Indians/Africans) in the Guyanese political scene. However, these divisions seem to have eased since local elections in March 2016, the first in 22 years. Despite some progress, the business climate in Guyana remains difficult (124th out of 190 countries in the World Bank's 2017 Doing Business survey).
Despite an international ruling setting the current borders, Venezuela made the unilateral decision in 2015 to assert its sovereignty over nearly two-thirds of Guyana's territory and maritime borders via publication of an official decree. This came one week after the announcement of the discovery of oil off the coast of Guyana, in the zone disputed by Venezuela, and rekindled a controversy that goes back over a century. In December 2016, Ban Ki-Moon, UN outgoing General Secretary gave both countries one additional year to settle the dispute. If no significant progress is made before at the end of that period, the controversy will be taken to the International Court of Justice (ICJ), in accordance with the wish expressed by Guyana. Welcomed by both countries, this decision will especially please Guyana, hoping that the threat of a referral to the ICJ will put an end to the failures of the mediation process. The dispute has affected the trade between the two countries. For example, Venezuela, still in top three destinations for Guyanese exports in 2013, has terminated the agreement to import rice from Guyana in return for cheap oil in the framework of Petrocaribe.
Last update : January 2017