Bank of Guyana report shows…Economy declined in 2014

May 24, 2015 News

– Gold performance played major role
A Bank of Guyana (BOG) report shows that Guyana’s economy declined in 2014, and the drop in gold declaration apparently played a major role in this regard.

The Bank of Guyana report showed that Guyana’s real and nominal output expanded in 2014.

In the Bank’s 2014 report, it was shown that the Guyanese economy continued to register “broad-based real economic growth”, albeit at a slower rate. This growth, the report said, was 3.9% while in 2013 the growth had been 5.2%. The report further said that the growth reflects higher sugar, rice, forestry and manufacturing output along with the expansion of the service sectors activity.
However, the growth would have been higher if the mining sector had performed better.
According to the BOG report, the mining sector contracted by 11.5% in real terms due to lower gold and bauxite output. It was noted that this outturn was on account of relatively less favourable gold and bauxite prices.
In regards to gold, total declaration declined by 19.5% to 387,508 ounces or 86.1% of the downward revised targeted amount of 450,000 ounces. “This performance was attributed to a contraction of small and medium scale production, owing to lower international prices during the year,” the BOG report stated.
With bauxite, decreased production was also noted; production decreased by 8.7% to 1,563,563 tonnes and represented 85.3% of the downward revised targeted amount of 1,833,169 tonnes for 2014.
Other commodities under the mining and quarrying sector such as diamond, stone and sand saw increased production from 2013.
In August 2014, former Finance Minister Ashni Singh had projected that Guyana’s economic growth for last year would be about 4.5%. Singh had initially projected in the 2014 National Budget a growth of 5.6% but this projection was amended due to the decline in gold declarations.
However, even Singh’s revised projection was not realized with the actual growth rate of 3.9% in 2014.
Meanwhile, the BOG report showed that the urban inflation was 1.2% at the end of December 2014. This rate reflected moderate increases in food prices. Additionally, strong domestic supply, the easing of commodity prices and relatively stable interest and exchange rates all contributed to the restraint of inflationary pressures on the real economy.
Furthermore, the overall balance of payments deficit narrowed marginally to US$116.4M from US$119.5M in 2013, the report indicated, while the total volume of foreign exchange transactions increased by 4.6% from 2013 and amounted to US$6,672M.
“The market was particularly impacted by increases in foreign currency accounts balances and hard currency transaction segments. Relatively higher net sales caused the Guyana dollar to depreciate against the United States dollar by 0.12% to G$206.50. Money transfer transactions were valued at US$228.7M,” the report said.
Meanwhile, the Bank projected that the Guyanese economy will grow by 5.3%. It was stated that this growth will manifest itself due to continued benefits from favourable terms of trade. This growth is expected to be driven by all sectors of the economy while inflation is targeted at 2%.
“Against this background, the Bank will continue to manage the expansion in base money and seek to stabilize the inflation rate. Additionally, it will also seek to ensure that credit to the private sector is encouraged to facilitate growth in the economy,” the report said.
In terms of Guyana’s Gross Domestic Product (GDP), real and nominal output expanded by 3.9% and 3.4% respectively. While the sugar, rice, forestry and manufacturing sectors contributed to growth, the outputs of gold, bauxite, fishing and wholesale and retail trade activities were all noted as experiencing drawbacks.
In terms of the sectoral composition of real GDP, the agriculture sector contributed 22.8%, marginally higher than 22.1% at end-2013 while the services sector’s contribution increased to 66.5% from 65.1% at the end of 2013. The manufacturing sector’s contribution (excluding sugar processing and rice milling) was lower at 3.9% during the reviewed period and the mining sector’s contribution was lower at 10.6% compared with 12.1% at the end of 2013, the report said.