IMF foresees improved economic growth this year

Mar 25, 2017 News

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-But urges that sustained growth hinges on improvements to business climate, private sector confidence

In spite of some of the controversial routes it has taken since assuming office, it appears as though the coalition administration is steering the economy in the right direction when it comes to nationwide development and stimulating growth.
This was one of the perspectives offered in the preliminary findings of the International Monetary Fund (IMF) staff that was recently in Guyana to assess the economic health of the nation.
A staff team from the Fund, led by Mr. Marcos Chamon, visited Guyana from March 6 to March 17 to hold discussions for the 2017 Article IV Consultation. Ms. Srobona Mitra, the Financial Sector Assessment Programme (FSAP) Mission Chief, joined the concluding meeting.
The team met with Finance Minister, Winston Jordan; Natural Resources Minister Raphael Trotman; Public Infrastructure Minister David Patterson; Central Bank Governor Gobind Ganga; other senior officials, representatives from the private sector, the opposition party, labour unions, and other stakeholders.
The visit by the IMF delegation was in keeping with its Article IV Mission.
Under Article IV of the IMF’s Articles of Agreement, the IMF usually holds bilateral discussions with members every year. During those consultations, the mission reviews the overall economic developments in the country, as well as its policy measures aimed at maintaining economic stability, ensuring a sustainable external balance and further liberalizing foreign trade.
Upon the completion of the IMF mission consultations, the IMF Executive Board discusses the staff report and issues an assessment of the country’s economic situation and the adequacy of its economic policy measures, based on a comprehensive analysis of the overall economic situation and a wider fiscal policy strategy of the member country.
According to the IMF Staff, Guyana’s economy continued to expand, although growth was uneven.
It said that in 2016, subdued agricultural commodity prices and adverse weather conditions led to a contraction of agriculture, with negative spillovers to manufacturing and services.
Additionally, it noted that delays in public investment remained a drag on construction.
Nevertheless, the Staff said that Gross Domestic Product (GDP) was buoyed by very large increases in gold output, including from new mines, with total real GDP increasing by 3.3 percent despite a contraction in non-mining GDP.
In 2017, the mission said that it projects real economic growth of 3.5 percent driven by an increase in public investment, continued expansion in the extractive sector, and a recovery in rice production. Should this become a reality, it would represent an increase from Guyana’s 2.6 percent growth rate last year.
Furthermore, the Mission said that despite weather-related shocks to food prices and excess demand during Guyana’s Golden Jubilee, inflation remained subdued at 1.5 percent at the end of 2016, and is expected to be around 2.5 percent at the end of 2017.
The Mission stated that increased exports of gold and improved terms of trade helped Guyana achieve a current account surplus. It also asserted that the anticipated start of oil production in 2020 will provide a significant boost to exports and official reserves in the medium-term.
Additionally, despite slower than expected growth, the IMF staff said that fiscal revenue increased due to improvements in tax administration and higher royalties from the mining sector.
The Mission expressed that expenditure increased less than projected mostly due to lower than budgeted public investment. In 2017, the staff said that the deficit is projected to increase to about seven percent of GDP, due in part to delayed capital spending from 2016 and the reclassification of subsidies to state owned enterprises as financing instead of revenue to the receiving enterprise.
While the IMF foresees an increase in real economic growth, it said that sustaining growth hinges upon improvements to the business climate, private sector confidence, reinvigorating construction activity and productivity-enhancing reforms in key sectors, including agriculture.
The mission welcomed the progress the Government has made in liberalizing the communications sector, and the authorities’ plans to increase the contribution of low cost renewables to the energy matrix, improve transportation links, and modernize the payment system.
The IMF staff said that addressing these long-standing structural impediments will stimulate construction, help raise productivity in traditional sectors, facilitate diversification into higher added-value activities, and make growth more inclusive for Guyana.

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