IMF projects rise in inflation this year

Jun 05, 2025 News

– says non-oil economy operating below potential

Kaieteur News – The International Monetary Fund (IMF) has projected that Guyana’s inflation rate will rise to about 4% in 2025, up from 2.9% at the end of 2024.

IMF said that the increase comes after a modest uptick in inflation last year, which was largely attributed to rising food prices exacerbated by earlier floods and global market volatility. The findings were disclosed in the IMF’s 2025 Article IV Consultation report, released last month, which entails a detailed assessment of Guyana’s economic performance and outlook.

The IMF said in its report that inflation in 2024 rose from a low base of 2% in 2023. It was noted that the non-oil economy still appears to be operating below its potential, although the output gap is closing. The Fund stated that labour and skills shortages across various sectors and annual salary increases in the low double digits are contributing to emerging inflationary pressures.

While inflation is expected to rise slightly this year, the Fund highlighted that both the fiscal deficit and the current account surplus are projected to narrow in 2025. Further, it was stated that over the medium term, continued expansion in oil production is expected to strengthen the country’s external position, with significant savings expected to accumulate in the country’s Natural Resource Fund (NRF). Notably, the IMF described the risks to Guyana’s economic outlook as “broadly balanced.”

On the upside, it was explained that additional oil discoveries and investments aimed at boosting productivity and energy resilience could further improve long-term prospects. In the short term, expanding construction activity is also expected to support stronger growth in the non-oil economy.

However, the Fund cautioned against potential downside risks. These include overheating pressures, which, if not managed, could push inflation higher and cause the real exchange rate to appreciate beyond sustainable levels. Volatile commodity prices, climate-related shocks, and shifting global trade policies were also highlighted as factors that could disrupt inflation trends and the broader macroeconomic outlook.

Despite these risks, the IMF maintains a highly favourable near and medium-term outlook for Guyana. The country’s economy is projected to grow by an average of 14% annually over the next five years, led by strong oil production and a rising contribution from the non-oil sector, particularly construction. Real non-oil GDP growth is expected to average around 6.75% over the medium term, roughly 3 percentage points higher than the pre-oil era average. The IMF also noted that inflation could climb to as high as 5.5% in the medium term, driven by pressures on non-tradeable prices and anticipated wage increases.

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