$383.1B Budget to advance economic recovery, rebound critical sectors
…2021 growth projected at 20.9%
In a more than four-hour-long presentation, senior Minister within the Office of the President with responsibility for Finance, Dr Ashni Singh on Friday presented to the National Assembly a whopping $383.1 billion budget for 2021 which is expected to catapult the country’s economic recovery and turn around the performance of critical sectors which faced major setbacks last year due to the COVID-19 pandemic and the protracted electoral process.
Budget 2021 was presented under the theme “A Path to Recovery, Economic Dynamism and Resilience” and it is the first full-term budget of the Dr Irfaan Ali-led Administration since its assumption to office in August 2020.
This year’s budget is underpinned by six main pillars: navigating the COVID-19 pandemic, ensuring a diverse and resilient productive sector, initiating investment, establishing world-class social services, improving public services, and ensuring respect for the Constitution and the rule of law.
“With these objectives in mind, this budget ensures we recover as a country both from 2020 and from the last five years of trauma; puts in place the policies needed to catalyse rapid economic growth in the near and medium-term; and lays the foundation needed to ensure that that growth is not transitory but is sustainable for the longer term,” the Finance Minister explained.
Economic performance in 2020
Despite the challenges posed by the pandemic and the electoral crisis, the economy grew by 43.5 per cent – a growth which was largely driven by the country’s emerging oil and gas industry.
The country’s non-oil economy, however, contracted by 7.3 per cent with sectors such as fishing, mining, manufacturing, forestry, and services recording declines.
While the agriculture, fishing, and forestry sector expanded by 4.1 per cent, the sugar-growing one contracted by 3.7 per cent, with production falling to a low 88,868 tonnes.
The rice-growing sector grew by 4.8 per cent, with paddy production reaching 1,057,580 tonnes in 2020.
With respect to the production of other crops, despite excessive rainfall in November and December, this sector is estimated to have grown by 6.6 per cent in 2020.
The Finance Minister explained that the COVID-19 pandemic would have resulted in increased demand for many fruits, particularly citrus.
Meanwhile, the livestock sector is estimated to have grown in 2020, recording an increase of 5 per cent. This was driven by poultry, egg and beef production, which are estimated to have grown by 10.4 per cent, 34.1 per cent, and 3.4 per cent, respectively.
On the other hand, the forestry sector contracted by 8.1 per cent while the fishing industry contracted by 17.1 per cent.
With respect to forestry, the Finance Minister explained that the poor performance is primarily driven by an 11.8 per cent decline in sawn wood production, reflecting the slowdown in construction activities.
Regarding fishery, he said the decline was largely a result of fewer vessels going out to fish due to lower domestic and external demand stemming from the pandemic.
On the matter of the extractive industries, mining and quarrying expanded by 303.7 per cent in 2020. The overall growth above 2019, the Finance Minister said, was driven by the emerging oil and gas and support services industry, which grew by 2603.3 per cent over the previous year, given that 2020 represented the first full year of the industry’s operations.
However, the gold mining subsector contracted by 7.8 per cent. Dr Singh said this can be attributed to the fact that one of the large gold mining companies ceased production in July 2020 to facilitate a transfer of ownership, and only resumed operations in November. He was referring to the operations at Aurora Gold Mine in Region Seven (Cuyuni-Mazaruni) which was taken over by Zijin Mining.
The other mining subsector, which comprises diamond and sand mining, contracted by 42.7 per cent in 2020.
Manufacturing contracted by 8.6 per cent, construction by 6.3 per cent, and services by 9.4 per cent. Meanwhile, the overall balance of payments recorded a surplus of US$60.6 million in 2020, compared to a deficit of US$48.9 million recorded in 2019.
The Finance Minister further revealed that the 12-month inflation rate in December 2020 was recorded at 0.9 per cent, mainly as a result of lower energy prices which offset higher food prices, largely driven by higher prices of meat, fish and eggs, and vegetable products.
Interest rate also remained low throughout 2020, he noted.
Targets for 2021
With the measures announced in the 2021 Budget, the Finance Minister said Guyana’s real Gross Domestic Product (GDP) is projected to grow by 20.9 per cent, with the non-oil economy growing by 6.1 per cent.
However, he explained that the projection is premised on the assumption that a reopening of the economy takes place with COVID-19 restrictions being gradually lifted and is, therefore, subject to significant downside risks.
Similarly, the agriculture, fishing and forestry sector is expected to expand by 5.6 per cent while the mining and quarrying sector is projected to grow by 39.1 per cent.
In the oil and gas subsector, the daily rate of production for 2021 is expected to be just over 109,000 barrels of oil per day. This subsector is projected to grow by 46.7 per cent in 2021.
Manufacturing, construction, and services are expected to improve by 7.3 per cent, 9.1 per cent, and 5 per cent respectively.
For 2021, inflation is projected at 1.6 per cent, due to expectations of increased economic activity as COVID-19 restrictions are lifted with concomitant effects on commodity prices.
Further, the overall balance of payments is expected to register a lower surplus in 2021, amounting to US$59.9 million compared with US$60.6 million in 2020. (G11)