A synopsis of the performance of the economy – 2016/2017

Guyana’s economy recorded real economic growth of 3.3 percent for 2016, while projected growth for 2017 is set at 3.5 percent, according to the IMF Country Report on Guyana, which was recently concluded.
A point of interest to note is that the projected growth set by the IMF cited that macroeconomic outlook for 2017 is positive in the medium term. In essence, this validates the arguments I presented last week, wherein I alluded to the short-sighted policies pursued by the current administration and said they will inevitably cost the economy long-term economic development deprivation.
While the IMF set a decent projection of 3.5 growth for 2017, the Economic Policy Analysis Unit of the Ministry of Finance set an ambitious target growth of 3.8 percent, which is expected to be driven by growth in the mining, quarrying and services sectors.
What is economic growth?
Economic growth is defined as the rate of increase in economic output. It must also be noted that when we speak of economic growth, this is further broken down into two dimensions – potential growth and actual growth. Potential growth is simply the percentage annual increase in the economy’s capacity to produce, or the rate at which the economy could grow. Actual growth refers to the percentage annual increase in national output, or GDP (Gross Domestic Product). An efficient, skilled and competent government therefore, against this premise, needs to configure macroeconomic policies to articulately achieve maximum output, or growth potentials within the framework of the national economy’s capacity to grow. Capacity in Guyana’s context means, the resources at our disposal; for example, natural resources such as gold, bauxite, arable land (agriculture), institutional capacity, human capital and so on.
With this in mind, Guyana’s economy constitutes several productive sectors; namely, Agriculture (rice & sugar); forestry; Mining and Quarrying (bauxite & gold); Manufacturing, and the Services Sector which includes the financial sector. As at the first quarter of 2017, the economy registered uneven growth in sectorial output relative to the corresponding period last year (BoG quarterly report, 2017). The Agriculture sector recorded 51.5 percent increased production in rice, while sugar contracted by 33.8 percent on account of operational constraints, closure of Wales estate, and lower market prices.
Making sense of the economy’s overall performance, it must be noted that while the economy grew on average by some 3 percent, by the end of the third quarter, projected growth will have to be revised downwards, especially if the Government proceed with their touted plans to close more estates. This is in light of the recent IMF report on Guyana’s economy, which was recently released in the press. And I therefore need not regurgitate the findings and concerns highlighted therein.
Instead, I shall examine the efficacy of Government’s fiscal policies – that should be developed to influence national economic growth. In this respect, it is imperative that I briefly revert to a recently concluded topic this column dealt with extensively – i.e. the sugar industry and GuySuCo. I recently read the Agriculture Minister stating that there is no need to advance further debate on sugar, wherein he posited that the Government expended billion annually to keep GuySuCo afloat, and also boldly stated that the money could have gone to increase public servants’ salaries.
(Permit me to divert a bit here, this article featured in Guyana Times dated July 7, 2017 the figure of billion quoted by the Minister, might I mention respectfully, is incorrect. It would appear that ministers of Government have adopted a new habit of misleading the nation by quoting, on key economic matters, exorbitantly high figures manufactured out of the sky. The realistic figure of Government’s injection into GuyuCo is estimated at about billion annually, and not billion).
Against the backdrop of the extensive work I just concluded in this column, and critiquing the White Paper (akin to a high school pupil’s essay), I find this position ridiculously hilarious. The 0M spent annually on unnecessary presidential advisors could be used for increases in public servants’ salaries.
Now, a government’s responsibility should not be based on a business model – meaning the approach taken on the GuySuCo fiasco, basing it on profit and loss. How do you define profit and loss in this context is what is important. The cost on the economy – social and economic impacts — should be the focus for governments. Governments need to understand that their fundamental role is to manage the economy; and in doing so, they need to create policies that would enable the environment and fuel economic growth. Heavy taxation and taking away thousands of jobs are the reverse of such an objective. When we look at our neighbour Trinidad & Tobago, for example, the Trinidad/Tobago Government have injected billions of dollars into Caribbean Airlines — an estimated TT billion — between the periods 2011-2015 (equivalent to Gy billion, or US8M). This is a state-owned entity, but Government injected the funds just to keep it going. LIAT is another airline that benefits form government subsidies for the same reasons. Why did they find this necessary? Because they have recognised its role as having national importance to their countries. Hence every effort needs to be undertaken to keep it going. Likewise, GuySuCo and sugar is of national importance to Guyana, and a similar approach is imperative.
Further, if Government wishes to increase public servants’ salaries, here are some decent suggestions: Government officials have accorded to themselves increases in benefits and allowances that will cost the nation in excess of 0M annually, the Durban Park Project came up close to B dollars, and the subsidies given for the supply of electricity to Linden amount to hundreds of millions also. These are classic examples of expenditure that are truly bleeding the nation.
(For comments, questions and responses on articles featured in this column, readers can reach the author at [email protected]).