Growth Forecast?

May 09, 2009 Editorial

The Minister of Finance recently trumpeted some projections on economic growth that were issued by the International Monetary Fund (IMF) a month ago. For Guyana, the Fund is projecting that our economy will expand by some 2.6 percent this year as apposed to the 4.7 percent the Government predicted at the presentation of the budget three months ago.
We found the Minister’s comments to be rather smug and complacent in light of the anticipated drop of 2.1 percent in the absolute growth rate which amounts to a 44 percent fall from the Minister’s original (optimistic) projection.
The IMF projection becomes even more worrisome when one considers that this latest report contains the fifth downgrade of its global growth forecasts in just over six months, illustrating just how rapidly the global economy has deteriorated.
There have been no signs that things will not get worse before any possible upturn. The Minister chose to impart a positive spin on the IMF’s figures on Guyana by noting that the economies of Latin American and Caribbean countries as a bloc were projected to shrink by 1.5 percent within an overall global downturn of 1.3 percent.
However, this is more than a bit disingenuous when we note that our economy is very anaemic compared to others (just above Haiti, the poster-child of world poverty, in the Western Hemisphere) and therefore even a 2.6 percent increase in our GDP still leaves us seriously lagging.
What we hoped the Minister would have done was to specifically identify the areas that the IMF felt were going to under perform as apposed to expectations and tell us what actions the Government was taking to minimise those effects – all within a general stimulus programme for the economy.
All he did was to baldly note: “The (IMF) analysis does suggest that there is evidence that domestic policy in some countries within the region will help these countries rebound from the crisis, and in some cases, to rebound a little bit earlier than has been anticipated.” OK; but what about our “domestic policy” to help us “rebound from the crisis”?
After he had presented the 2009 Budget we had pointed out: “The travails of the expected expansion at Skeldon (even with the new three-year scenario for reaching optimum production) are not confined to the commissioning of the factory and, as with the field-related problems that have snowballed in the other estates, will push production down and costs up.
We project that the $5.7billion deficit piled up by GuySuCo in 2008 will double in 2009.
The announced deferred acreage in rice cultivation on account of the present flooded conditions especially in Regions Five and Six will push rice production further down.
Bauxite production will be slashed even further, not only on account of the global collapse of demand, but also on account of Rusal’s own problems. Fishing, forestry and manufacturing all declined in 2008 and that trend will continue.
Nothing has changed with the running of GPL and the theft of power combined with the Corporation’s inefficiencies will most certainly see it running back to the Government for a subsidy – hopefully less than the $3billion it extracted in 2008.
In terms of new investments that might generate income and jobs, the budget was very reticent. The hydroelectric project is once again deferred for another year because of “financing” constraints, as is the much-touted alumina plant.
If even the sun-swept beaches of our Caribbean neighbours were not attracting their usual hordes, it would be quite a stretch to expect us to buck the tide. The Minister confirmed that personal remittances were down for 2008 and that the trend will be accentuated in 2009.
With all of the foregoing we find it hard to accept that overall, our GDP is targeted to grow by 4.7 percent in 2009.
Where will the growth come from? Financial services? Clico’s fiasco should put a damper on that hope.”
Our critique has unfortunately been vindicated and we hope that even at this late stage, the Minister will unfurl a concrete plan for growth rather that having us float like jetsam on the turbulent financial seas.

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