The Ministry of Finance, Guyana, in its 2020 annual Public Debt Report has disclosed that for the year 2020, the country’s Real Gross Domestic Product (RGDP) grew by an estimated 43.5 percent. This growth is said to be fuelled by the production of the country’s newly discovered natural resource, oil, since the non-oil economy has contracted by an estimated 7.3 percent.
The growth rate of real GDP is one of the most common indicators used to track the health of a nation's economy. In simple terms, an increase in real GDP is interpreted as a sign that the economy is doing well. Prima facie, a healthy economy would mean, lower unemployment rates and higher wages.
Tim Callen, Assistant Director at the International Monetary Fund’s (IMF) External Relations Department in his article ‘Gross Domestic Product: An Economy’s All’ published on IMF's website and updated on February 24, 2020, noted “GDP measures the monetary value of final goods and services — that is, those that are bought by the final user — produced in a country in a given period of time.”
“To determine “real” GDP, its nominal value must be adjusted to take into account price changes to allow us to see whether the value of output has gone up because more is being produced or simply because prices have increased,” he further stated.
As of December 2020, the 12-month inflation rate was 0.9 percent. The Public Debt Report 2020 notes that inflation for the year was curtailed by lower energy prices, which neutralised the increase in food prices, caused by higher prices of meat, fish and eggs, and vegetables and vegetable products.
According to the report, this 7.3 percent contraction of the ‘non-oil’ economy reflects the combined effect of the COVID-19 pandemic on the local economy, and the pandemonium that followed the country’s March 2, 2020 Regional and General Elections, which saw some five months of political impasse before the results of the elections were finally declared.
However, while the ‘non-oil’ economy contracted, the agriculture, forestry and fishing sector grew by an estimated 4.1 percent, largely fuelled by the growth in rice production as the sector grew by an estimated 4.8 percent. Despite the heavy rainfall experienced in November and December the production of other crops is said to grow by an estimated 6.6 percent. The livestock sector grew in 2020, by 5 percent.
On the other hand, the report reveals that the sugar cultivation sector contracted by an estimated 3.7 percent while the forestry sector contracted by an estimated 8.1 percent and the fishing sector output is estimated to have declined some 17.1 percent.
The mining and quarrying sector expanded by 303.7 percent, driven entirely by a 2,603.3 percent expansion in the oil and gas and support services industry in the first full year of oil production. Gold mining contracted by 7.8 percent, bauxite production declined sharply, by an estimated 41.2 percent, and the other mining subsector, consisting of diamond and sand mining and stone quarrying, is estimated to have contracted by 42.7 percent.
The manufacturing sector contracted by an estimated 8.6 percent, with sugar, rice and other manufacturing subsectors contracting by 3.7 percent, 5.7 percent and 10.8 percent, respectively.
The country’s Senior Minister in the Office of the President with responsibility for Finance, Dr. Ashni Singh in this message in the Public Debt Report 2020 noted that for the year, the central government registered a deficit equivalent to 9.4 percent of GDP.
“It therefore became necessary to contract new financing, in order to provide essential relief and services to the populace, invest in growth-promoting infrastructure, and stimulate an overall resurgence of the non-oil economy,” he noted.
The 2020 report notes Guyana’s economy is projected to experience a high rate of real growth in the immediate term, reflecting the ramping up of oil production. Real economic growth of 20.9 percent is expected in 2020, with non-oil growth of 6.1 percent anticipated. Importantly the report states that this projection is premised on a reopening of the economy and the gradual lifting of Covid-19 restrictions, and hence, is subject to significant downside risks.