Home Letters Economic slowdown in Guyana since 2015 with no signs of recovery
As I travel around the country, people complain about the difficulties of making ends meet – wages have not been keeping up with price increases, and money is not readily available to spend. Many are recently out of work and unable to afford basic needs.
The Government has not shown that it is seriously concerned about the fragile economy, moving from high taxation to closing down state factories. There has, since 2015, been an economic slowdown with no sign of recovery. Figures show that growth has been anemic — of less than three per cent. The Private Sector has not been growing. Businesses feel insecure to invest. They lack confidence in the handlers of the economy, especially since their advice has not been sought on investment.
There is no doubt that there has been a lack of confidence by consumers and the business community in the Government’s management of the economy. They don’t fully support the new budget, though they like the pension increase and the removal of the education tax.
Contrary to what the Government may feel, the economy has not been on an upswing or a rebound after two years of slowdown. No effective measures have been taken to reverse the slowdown, which began to be observed since the end of 2015, following the change of administration. The Government has been responsible for the slowdown. There is no justifiable reason to shut sugar factories and send home some ten thousand workers. Sugar has been the vanguard of the economy – contributing significantly to growth for several decades.
Although the Government had to subsidize sugar, the benefits are enormous – providing much needed spending power to grow the economy.
The reversal of the tax on education is welcome, but that will not result in significant economic growth, although it could lead to private education expansion. There will now be more money to spend, which could boost growth by a fraction of a percent.
There are many economic challenges ahead – especially with Government closing down more sugar factories and oil prices rising to fuel the energy sector. Plus there are external headwinds – decline in purchasing as well as aid from the developed countries.
There is a serious trade imbalance that will put pressure on foreign currency reserve. Guyana needs to boost exports.
Agriculture remains in a slump. Agriculture is a significant contributor to rural lifestyle: incomes and consumption demand. The Government has made no effort to address farmers’ woes, and in failing to assist farmers during floods and price support for rice. A protracted agricultural slowdown on the larger economy cannot be overstated. Inflation for food has been very high; and consumers don’t have spending power because of the insecurity in the hiring.
Although people are not shopping, prices are increasing because of shortage of goods –with farmers not planting, and more imports coming into the country.
Consumption spending by households also remains in a stubborn rut. With global oil prices having risen appreciably, factories will produce less. Prices will increase, making exports costlier and reducing local consumer demand as well.
The economic challenges are many, and the Government can’t solve them by themselves. The Government should call in the various business organisations (chambers of commerce and manufacturing organisations, as well as captains of businesses) around the country to seek their input in how to grow the economy.