BoG projects 20.9% oil-economy growth

– 6.1% overall growth in other sectors

BoG Governor, Dr Gobind Ganga

Despite concerns of new strains of the novel coronavirus and the possibility of another lockdown in the country, the Bank of Guyana (BoG) has projected that the local economy will record a real oil Gross Domestic Product (GDP) growth of some 20.9 per cent while the non-oil economy is estimated to grow by 6.1 per cent.
“This performance is expected to stem from expansions in all the major sectors due to the reopening of the economy as the ongoing vaccination programme continues and the COVID-19 restrictions continue to be lifted. However, the new variants of the coronavirus pose a threat to this outlook, as there is the possibility of another lockdown. Notwithstanding, the end of year inflation rate is expected to be 1.6 per cent due to increased economic activities as the economy picks up,” the BoG said in its First Quarter Report for 2021.
This projection comes in line with the World Economic Outlook estimating the global economy to grow by 6.0 per cent in 2021 as a result of optimism surrounding vaccine rollouts as well as renewed fiscal and monetary countermeasures in several major economies. However, the spread of new COVID-19 strains, new infection waves and unequal access to vaccines by emerging and developing economies have cast uncertainty on the robustness of the recovery.
Nevertheless, Guyana’s Central Bank in its report stated that while the local economy continued to benefit from oil production, a mixed output performance was recorded in the major sectors as the non-oil economy is still recovering from the impact of the ongoing COVID-19 pandemic.
It was noted that the agriculture sector recorded increased production of rice, fish & shrimp, sugar, eggs and poultry meat while the forestry subsector contracted. In the mining and quarrying sector, production of sand, bauxite, stone and gold were lower while crude oil and diamond production increased.
The manufacturing sector also recorded mixed performances with liquid pharmaceuticals, nitrogen gas, oxygen, paints and alcoholic beverages performing favourably while there was a decline in production of acetylene, ointments, tablets and detergents. The construction sector recorded positive performance on account of increased public and private construction while there were increased activities in the services sector as the authorities commenced lifting COVID-19 restrictive measures.
The inflation rate was 0.6 per cent at end March 2021. This reflected higher prices in the subcategories of transport and communication, food, education and housing. However, there were lower prices in the categories of clothing, footwear and repairs and miscellaneous goods and services.

Balance of payments
Further, the BoG reported that the overall balance of payments recorded a lower deficit of US$53.8 million compared to US$76.7 million for the same period last year.
“This outturn reflected a reduced current account deficit despite a decline in the capital account surplus. The improvement in the current account resulted primarily from increased export receipts from crude oil notwithstanding higher import costs. The contraction in the capital account was due to lower net foreign direct investments attributable to oil cost recovery by the oil and gas sector,” the First Quarter Report detailed.
Meanwhile, it was noted that Guyana’s net international investment position (NIIP) was US$7203.6 million at the end of March 2021, a deterioration of US$322.1 million or 4.7 per cent from the end-December 2020 position.
The total value of transactions on the foreign exchange market increased by 7.2 per cent or US$185.9 million to US$2768.6 million. The overall financial position of the public sector – which includes the Central Government and the Non-Financial Public Enterprises (NFPEs) – recorded a surplus of G$14,251 million, at end-March 2021, reflective of improved performances of both the NFPEs and Central Government.
The total stock of public debt, which comprises both external and domestic debt, increased by 3.9 per cent to US$2692 million at end-March 2021, compared to the end December 2020 position. Domestic debt stock increased to G$280,650 million or US$1,346.0 million at the end of the first quarter of 2021. Domestic debt service payments expanded to G$29,439 million as a result of principal repayments for treasury bills redeemed for fiscal support.
The stock of external debt expanded to US$1345.9 million, almost the same level as that of domestic debt. This outturn was on account of a rise in multilateral debt, reflecting increased loan disbursements by these creditors during the review period. External debt service payments, which accounted for 2.6 per cent of export earnings, increased by 5.2 per cent, mainly due to higher principal payments to multilateral and bilateral creditors.
At the end of the first quarter of 2021, the financial system remained relatively stable with the Licensed Depository Financial Institutions (LDFIs) being adequately capitalised, highly liquid and profitable.
Further, at the end of the review period, a total of 1608 facilities amounting to $28,759 million benefited from the COVID-19 relief measures that were put in place by Government for the banking sector. The services sub-sector continues to account for the largest portion of the relief, as the sector was particularly affected by the public health measures implemented to curb the spread of the virus.

2021 Outlook
Nevertheless, the Central Bank noted that interest rates are expected to remain relatively stable in 2021 reflective of the adequate level of liquidity within the banking system. It added that the financial system is expected to remain sound due to measures taken by the Bank to mitigate any threat as a result of the ongoing pandemic.
In its outlook for 2021, the BoG also projects the external current account will improve largely due to oil exports coupled with higher export prices for gold and rice. The total receipts of foreign currency by Central Bank are estimated to increase to US$902.3 million while total payments are targeted at US$838.9 million.
Additionally, Central Government’s overall balance is anticipated to marginally improve to G$90,285 million as economic activities pick up, leading to increased revenue earnings from taxation despite the anticipated growth in expenditure. The NFPEs overall deficit is expected to widen as the public enterprises slowly recover from the effects of the coronavirus pandemic.
“In particular, GuySuCo is anticipated to record an increase in both capital and current expenses as efforts continue towards increasing the capacity of the existing estates and reopening those that were closed. Total public debt is expected to expand to US$3137.9 million, due to increases in both domestic and external debt stock while debt service payments are anticipated to rise. The growth in domestic debt stock will reflect higher issuance of treasury bills for fiscal support while the increase in external debt will stem from greater obligations to multilateral creditors,” the report stated.
It went on to detail that monetary aggregates of reserve money and broad money are estimated to expand in 2021, with the former due primarily to increased net foreign assets of the Bank of Guyana while the latter is expected to stem from higher net foreign assets and Private Sector credit.