Economy rebounds, but falls below 2018 projections -GRA rakes in $28.3B more, public enterprises continue to underperform

Nov 27, 2018 News

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Despite contractions in the sugar and mining sectors, Guyana is expected to realize real growth in the Gross Domestic Product (GDP) of 3.4 percent for 2018, a significant improvement on the 2.1 percent recorded in 2017.
This was disclosed by Minister of Finance, Winston Jordan during the 2019 budget address to the National Assembly yesterday.
According to Jordan, total revenue of $216.9B is expected, representing $15B above the budgeted $201.9 billion and $21.8 billion or 11.2 percent higher than collections, in 2017.
The Finance Minister disclosed that the revenue growth was due in part to the efforts by the Guyana Revenue Authority (GRA), which embarked on a nine-month tax amnesty that ended in September 2018. The measures, he stated, are expected to increase tax revenue collections to $199.5 billion – $28.3 billion over 2017.

“Higher collections of withholding tax, excise tax, personal income tax and value-added tax (VAT), by 36.7 percent, 21.0 percent, 19.3 percent and 14.3 percent, respectively, are projected to contribute to this improved performance. Taxes from international trade transactions, including import and export duties and travel taxes, are projected to rise to $3.3 billion, 20.5 percent above the 2017 revenue collection,” Jordan stated.
The GRA is anticipated to remit about $73 billion, up from $49.2 billion, in 2017. According to Jordan, this upsurge is mostly associated with remissions related to investments within the petroleum sector, as evidenced by the 74.2 percent rise in remissions to companies and businesses.
The target for real growth in the economy for 2018 was 3.8 percent. At the end of the first quarter, the outlook for the year was revised to 3.4 percent, given the lower-than-expected performance in gold and sugar.
By the end of the first half of the year, growth had reached 4.5 percent. This resulted in an upward revision of the projected annual growth rate of 3.7 percent.

SUGAR AND MINING
It was disclosed that there was severe contraction of 25.2 percent in sugar production, which was anticipated due to the decisions taken by government to close estates. The Guyana Sugar Corporation (GuySuCo) is now charged with managing the operations of three estates.
According to Jordan, the ongoing recapitalisation of the Albion, Blairmont and Uitvlugt Estates, as part of the Sugar Task Force’s three-year plan for GuySuCo, is anticipated to result in production in future years rising from a low of 98,000 tonnes in 2018, to nearly 145,000 tonnes by 2021.
Jordan stated that growth in the forestry sector is projected to be a disappointing 0.2 percent, following a promising performance up to September. Poor weather conditions affecting the transport network, and delayed road maintenance, served to further constrain growth of this sector.

EXPENDITURE
Jordan shared that central government expenditure for 2018, is projected at $261 billion, 8.7 percent above the 2017 level. Current expenditure is anticipated to reach $201.9 billion, of which $193.4 billion is non-interest current expenditure. Capital expenditure is anticipated to be $59 billion, an increase of 0.7 percent above 2017, but 1.1 percent below the budgeted amount for 2018.
However, Jordan noted that the performance of the public enterprises remains a cause for concern with the budgeted deficit of $10.1 billion, worsening to a latest forecast of $15.8 billion for 2018. This represents deterioration from the deficit of $13.0 billion recorded for 2017.
Overall, between the budgeted and revised positions for 2018, revenue of the Public Enterprises declined by 2.8 percent, to $120 billion, while the total non-interest expenditure grew by 8.2 percent to $126 billion.
These outcomes, according to Jordan, resulted mainly from lower sugar production by GuySuCo, and higher acquisition cost of fuel by Guyana Power and Light Incorporated (GPL) and Guyana Oil Company (GuyOil).

PUBLIC DEBT
The Finance Minister stated that for 2018, the ratio of total public debt-to-GDP is projected to decrease by 2.6 percentage points to 44.4 percent relative to 47 percent at the end of 2017.
He said external debt service is projected to increase by 27.2 percent, up from US$60.8 million in 2017 to US$77.4 million, in 2018.
According to Jordan, this is primarily due to higher principal and interest payments to the Inter-American Development Bank (IDB), International Development Association (IDA), Caribbean Development Bank (CDB), China Exim-Bank, Venezuela (PDVSA) and Republic Bank of Trinidad and Tobago.
He also cited higher interest rates and exchange rate depreciation.
“In spite of this, our external debt servicing obligations remain manageable, with only some 7 cents of every dollar earned by Government going towards debt servicing. This Government has not and does not intend to compromise the fiscal integrity of Guyana by contracting large debt, in light of impending oil revenues,” Jordan stated.
At end of 2018, the external debt stock is projected at US$1.3 billion, higher by 4.6 percent or about US$56.5 million, than the previous year.
Notwithstanding, Jordan stated that the external debt-to-GDP ratio is projected to decrease from 34.9 percent in 2017 to 34.2 percent, in 2018, reflecting improved growth performance.
The Finance Minister presented the 2019 Budget under the theme, ‘Transforming the economy, empowering people, building sustainable communities for the good life’.

 

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