Guyana’s economy strong, but skills gap, inflation risks loom — new IDB report

Jan 16, 2026 News

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(Kaieteur News) – Growth in Guyana is expected to remain strong in the medium term, but upskilling the labour force remains a major challenge, according to the Inter-American Development Bank (IDB).

In its latest Caribbean Economics Quarterly, titled How Are External Forces Impacting Trade, Growth, and Investment in the Caribbean, the IDB said Guyana’s economy continues to be underpinned by rising oil output and non-oil sector expansion, with average growth projected at 14 percent between 2026 and 2030. The bank noted that the government has recognised the need to significantly expand human capital and has introduced free tertiary education, funded thousands of scholarships, and supported vocational training.

However, in the short to medium term, Guyana faces downside risks. These include the potential emergence of Dutch Disease, reflected in real effective exchange rate appreciation, reduced competitiveness in non-oil sectors, slower growth, and inflation. While the IMF’s 2025 Article IV report found no clear evidence of Dutch Disease, it flagged warning signals such as increasing oil sector concentration, sustained high government spending, rising inflation, currency appreciation, and changing growth and labour patterns in non-oil sectors such as gold mining and agriculture.

The report highlighted that fiscal resources remain abundant, with oil revenues largely financing planned government spending of nearly 25 percent of GDP. Revenues are projected to exceed US$5 billion, or 20 percent of GDP, by 2025. However, not all oil earnings are being withdrawn, as a significant share is being saved in the Natural Resource Fund to manage oil price volatility, ensure intergenerational benefits, and create fiscal space to respond to economic shocks.

According to the IDB, public investment spillovers have boosted the services sector and could support future manufacturing growth. Infrastructure development, institutional strengthening, and human resource investment have driven non-oil expansion, particularly in construction. Large public projects, including roads, bridges, hospitals, and the gas-to-energy project—expected to cut electricity costs by 50 percent—have underpinned recent growth. Manufacturing has also shown strong momentum, with double-digit growth over the past two years, supported by improved energy supply, regional connectivity, human capacity development, and digitisation.

Oil Price Risks Partly Offset by Production Growth

The bank said the impact of declining oil prices on Guyana is expected to be partly offset by rising production volumes. Global policy uncertainty and weaker oil demand growth are weighing on prices, with the World Bank projecting a 12.9 percent decline to US$68 per barrel in 2025 and US$60 per barrel in 2026, levels expected to persist through 2030.

If these projections materialise, Guyana could face lower oil profits, reduced government revenue, and scaled-back investment plans. However, oil production is forecast to increase to 1.5 million barrels per day by 2029, driven by three new projects. This would double current output and maintain profitability, provided prices remain above Guyana’s break-even level of US$28 per barrel. Investment in the oil sector is projected to reach US$77 billion between 2019 and 2028.

Limited Impact from U.S. Tariffs

Despite the United States imposing reciprocal tariffs of 38 percent on Guyana, the IDB said overall trade is unlikely to be significantly affected. Oil, which accounts for an average of 91 percent of exports between the two countries, is exempt from these tariffs. Other exports such as gold are also exempt, while aluminium is subject to a lower 25 percent tariff. Together, gold and aluminium represent a small share of bilateral trade. However, the bank cautioned that the tariffs could hinder Guyana’s economic diversification efforts, particularly in agriculture and manufacturing.

At the same time, global trade tensions and policy uncertainty could push up import prices, especially for food, intensifying inflationary pressures. Food prices in Guyana rose by 8.2 percent in August 2025 and are expected to drive inflation to 3.6 percent, up from 2.9 percent a year earlier. Guyana’s terms of trade have also deteriorated, reflecting higher import prices and falling oil prices. The index declined by 32.4 percent in 2023 and 0.3 percent in 2024, before stabilising at 47 percent in September 2025. If this trend persists, it could further fuel inflation, increase demand for foreign currency, and complicate the central bank’s efforts to stabilise the exchange rate and manage Dutch Disease risks.

Meanwhile, overall, in the Caribbean, the report said that economies in the region have demonstrated notable resilience in the face of global economic headwinds. Strong performance in tourism and energy has anchored regional growth, although significant downside risks persist.

The report noted that the Caribbean remains vulnerable to external shocks, highlighting that potential weakening of labour markets in North America, cautious investor sentiment, and evolving global supply-chain patterns are among the key risks that could dampen growth prospects. “The Caribbean has navigated a complex global landscape with commendable stability, but we must remain vigilant,” said Anton Edmunds, IDB general manager for the Caribbean. “This report provides a clear-eyed view of the challenges ahead, while also highlighting significant opportunities for growth. Investments in tourism, reliable energy, and technology-focused foreign investment can build greater resilience and secure a more prosperous future for the region.”

The report notes that the downward trend in global commodity prices has eased current account pressures for oil-importing countries, while Guyana’s expanding oil sector continues to drive robust growth, with promising prospects for Suriname’s oil sector in the coming years. Tourism-dependent economies such as The Bahamas and Barbados demonstrated strong performance in the first half of 2025, supported by buoyant travel demand.

The recent impact of Hurricane Melissa on Jamaica underscores the severe disruptions that natural disasters can inflict on critical sectors, including agriculture, mining, and tourism, with broader implications for the entire region’s economy. Despite the challenges, the report identifies significant opportunities for the Caribbean. Diversification within tourism and services, renewed interest in energy resilience, and technology-focused foreign direct investment, which is expanding globally. The Caribbean’s increasing geographic diversification in trade also offers some insulation from global tensions.

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• Caribbean economies, Guyana’s economy, IDB, inflation, skills gap, U.S. Tariffs

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