…as Mid-Year Report warns of economic consequences for Guyana
The first half of 2018 has seen Guyana’s Balance of Payment deficit take a sharp leap forward, when compared to the same period for 2017 and even the Finance Ministry’s Mid-Year Report is warning of the consequences.
The value of Guyana’s imports are on the rise
The report, which was laid in the National Assembly only days ago, details that Guyana for the first half of the year recorded a deficit of US$139.8 million. This is in contrast to the corresponding period for last year, when the deficit was just US$46 million.
“Guyana’s Balance of Payments deficit increased further as a result of a significantly higher deficit on the current account, which more than offset a surplus on the capital account.
The weakening of the current account, from a deficit of US$79.2 million to a deficit of US$194.1 million, was due to higher deficits on the merchandise trade and services accounts, notwithstanding increased net unrequited transfers,” the report states.
“The negative balance on the merchandise trade account widened to US$218.0 million during the first half of 2018, from US$112.2 million, in the first half of 2017, attributed to stronger growth in total import payments, which rose by US$137.8 million over the review period.
Growth in imports was driven by an overall expansion in all major categories, intermediate goods by US$92.6 million, capital goods by US$41.1million and consumption goods by US$3.6 million.”
According to the report, the total value of imported capital goods was driven by increases in all sub categories except agricultural machinery. IN fact, the report notes that this decreased by US$5.6 million.
“Within the overall category, substantial growth was recorded for mining machinery, “other capital goods” and industrial machinery, which expanded by US$13.9 million, US$10.6 million and US$9.7 million, respectively.”
“The expansion of imports of consumption goods was mainly due to significant growth in food for final consumption and other durables, which increased by US$9.2 million and US$8.2 million, respectively over the reporting period. Further growth in this category was limited by a reduction of US$22.8 million in the value of ‘other non-durable’ goods imported.”
The report warns that global risks, such as rising commodity prices, climate change and turbulent international trade relationships, do pose a threat to the stability and progress of Guyana’s economy. And it warned that increased importation will put a strain on the country’s foreign reserves.
“Specifically, the issue of climate change, which brings with it unpredictable weather patterns, has the ability to adversely affect the agriculture and mining and quarrying sectors, and, consequently, restrict production.
On the other hand, while commodity prices are expected to strengthen, in 2018, this will have mixed effects.”
“On the positive side, rising prices offer favourable prospects for the exporting Sectors – gold, rice, timber and aluminium. However, the increased importation of Intermediate goods, especially fuel and lubricants, and consumption goods, could likely offset the gains from export earnings. This could put a strain on Guyana’s international reserves, reinforcing the urgency with which economic diversification and resilience – Strengthening must take place,” the report states.
Balance of Payments is statistical data on a country’s fiscal transactions, including imports and exports. To therefore record a deficit, Guyana would have had to spend more on imports, among other things, that it derived from exports.
According to the 2017 Macro-economic Report, Guyana’s overall Balance of Payments in the last fiscal year showed a deficit of US$69.5 million.
This is a hike when compared to US$53.3 million the previous year.
