Guyana records lowest growth rate in decades

Apr 14, 2018 News

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By Kiana Wilburg

While it is still considered positive, a 2.1 percent growth rate for 2017 is the lowest Guyana has been in decades.
This figure and accompanying details were released yesterday morning by Finance Minister Winston Jordan during a press conference.
The Minister’s comments came on the heels of criticisms by the political opposition that it is almost four months into the New Year and the nation remains in the dark about the actual performance of the economy.
Setting the record straight on the matter, Jordan said the report on the economy has been prepared over two weeks now. He said it was perused by Cabinet and cleared for presentation to the National Assembly at its next sitting which is scheduled for April 26.
That said, the Finance Minister expressed, “The economy did not perform as robust as we expected it would last year. But even at the half year, we were predicting that the economy would not do well. At the end of the day, it turned out to be worse than we predicted. So even though there was positive growth for last year, it ended up being 2.1 percent.”
He continued, “Sugar we budgeted at 280,000 tonnes but it came in at 137,307 tonnes. Rice did quite well. It was budgeted at 600,000 tonnes and came in at 630, 104 tonnes. Bauxite did not do well. We had budgeted 1,726,008 tonnes, but it came in at 1,459,223. Gold was a major disappointment. It was budgeted at 694,000 ounces but came in at 653,674 ounces. Forestry did reasonably well and …is showing signs of recovery. We budgeted 318,000 cubic metres but came in at 349,900 cubic metres.”
“So as you can see, there are very indifferent performances in the various sectors. I have been quite open with you about this economy, in that, it has not changed much in 50 years. It usually depends on one or two products… One day you are up when gold is up and then down when sugar, bauxite or rice is down.”
The Finance Minister also noted that the nation’s critical sectors have always depended on some “grandfather”, that is, a protectionary market. He said that this was the case with rice and the Venezuelan market, where Guyana got premium prices for its produce. He noted that Guyana was able to benefit from the same market conditions for its rice in Trinidad and Tobago.
In terms of 2018, the Finance Minister said that the government looks forward to a better performance. He posited, however, that the sugar sector will continue to do poorly in the years to come.
FISCAL FORECASTING
Government, particularly the Finance Ministry, has faced much criticism lately from the political opposition for its failure to do proper fiscal forecasting for growth projections.
In 2015, Jordan noted that the growth rate was projected to be 3.4 percent but only a 3 percent growth rate was achieved. In 2016, the economist told the nation that the growth rate was expected to be 4.4 percent. This was revised to 4 percent but only a 2.6 percent growth rate was realized.
For last year, the optimistic Finance Ministry projected a 3.8 percent growth rate which was later revised to 3.1. The Finance Minister noted yesterday that only 2.1 percent was achieved.

COMMITTEE IN PLACE

The Finance Ministry has acknowledged in the past that there is room for improvement when it comes to fiscal forecasting.

In fact, Minister Jordan had pointed out that the Government embarked on several initiatives within the Ministry of Finance to enhance capacity to conduct economic analysis and assess risks to continued growth and development.

In this regard, Jordan had said that a Macro-Fiscal Forecasting Committee has begun meeting on a monthly basis to discuss the economic outlook of the nation and generate macroeconomic forecasts.

The Finance Minister said that good forecasts of macroeconomic conditions are an essential input into developing appropriate economic and fiscal policies.

Jordan said that while there is often a high degree of uncertainty around the point estimates in any economic forecast, a good forecast provides an accurate broad outlook for the economy and highlights the risks and uncertainties that officials should consider when making forward-looking policies.

Over the past year, he said that the Ministry of Finance, with support from the Caribbean Regional Technical Assistance Centre (CARTAC), has been working to improve its macroeconomic and fiscal forecasting.

He said that this led to the birth of an interagency Macro-Fiscal Forecasting Committee, which includes representation from the Bureau of Statistics, Bank of Guyana, Guyana Revenue Authority, and multiple divisions within the Ministry of Finance.

The Committee is responsible for advising on the data, assumptions, and judgments that go into the forecast model. The Committee is chaired by the Director of the Office of the Budget, Sonya Roopnauth, and managed by the Economic Policy Analysis Unit within the Office of the Budget, which is also responsible for updating and maintaining the forecast model.

According to Minister Jordan, the Macro-Fiscal Forecasting Committee meets on a monthly basis. In addition to providing inputs to the forecast model, meetings provide a valuable opportunity for interagency discussion about key risks and challenges for economic growth and development.

In the future, the Committee will also be responsible for analyzing the error margin on its forecasts and making improvements to the forecast model.

Jordan recalled that in November 2015, CARTAC conducted a workshop with staff from the Ministry of Finance, Bank of Guyana, Bureau of Statistics, and Guyana Revenue Authority to develop a model for forecasting key variables in the real and fiscal sectors of the economy, and train staff in the model’s use.

He said, too, that it was in June last that a second workshop was conducted to develop models for the external and monetary sectors of the economy.

The Finance Minister said that to produce an accurate forecast, the models require high quality data input and subjective judgments from experts in each sector of the economy.

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