As is required under the Fiscal Management and Accountability Act, the 2017 Mid-Year Financial Report, detailing the performance of the economy for the first half of fiscal year 2017, was on Friday last presented to the National Assembly by Finance Minister Winston Jordan.
Its contents have revealed that the country’s export earnings continue to decline, with gold now joining the list of commodities on the decline.
Minister Jordan has had to again revise downwards his overall projection for national growth. He reports that despite the “historically early budget, the required shift in planning cycles at the sectoral levels failed to keep pace… growth for the year has been revised to 3.1 per cent from 3.8 per cent.”
The Finance Minister has also reported: “Spending was less than one-third of the budgeted allocation.”
Of note in the report is that while many of the traditional sectors, such as sugar and forestry, continue to perform poorly, the gold sector — which has been credited with keeping the economy buoyant in recent years — has now also begun to decline in terms of production and earnings from sales on the international markets.
Total earnings from gold exports declined from a high of US$390.7 million in the first half of 2016, to US$388.8 million in the first half of 2017 — a decline the equivalent of Gy$404 million.
The information contained in the Finance Minister’s Report contradicts recent pronouncements made by Natural Resources Minister Raphael Trotman, who had projected growth in the gold sector based on the first quarter performance.
Minister Jordan attributes the decline in gold earnings and production to poor weather, despite a marginal increase in average export price over the period.
Actual Gold production fell by 1.7 percent to 317,096 ounces in the first half of 2017, compared to the same period in 2016.
Of the total gold declared, Minister Jordan said, 65.7 per cent came from small- and medium-sized miners and dealers, whose declarations were above projections while the two large gold companies were below projections.
Jordan also blamed the “switching to lower grade material by one of the producers, to facilitate remedial work at the higher yielding mine” as one of the factors that affected production for the large companies.
Despite the less-than-desired performance in the first half of the year, the Finance Minister remains optimistic. “Overall production is still expected to surpass its 2016 level, with the industry expected to grow by 1.7 percent in 2017,” he has projected.
The Bauxite Industry also continued along its economic decline, recording a further 11 per cent decline in production in the first half of this year.
According to the information supplied by the Finance Minister, the bauxite industry declined by 11.5 per cent as a result of reduced production of higher-value grades.
“This was due to poor weather combined with mechanical issues at one of the mines,” Minister Jordan says.
He reported, however, that production of metal grade bauxite (MAZ) increased by 97,016 tonnes, or 21.3 per cent.
He said the favourable international price for aluminum in 2017 is expected to boost output of bauxite during the second half of the year.
The other sectors of the mining and quarrying industry contracted by 13.1 percent in the first half of 2017, in comparison to a positive growth of 13.9 percent in the first half of 2016. This decline, he said, is driven by a reduction in the production of diamonds, sand, and stones.
“Declining diamond production was attributed to falling global prices and possible substitution by some miners into the gold industry as a result of the favourable prices of gold.”
The minister did report some good news, in that the manufacturing sector recovered in the first half of 2017, growing by 9.9 per cent following a decline of 14.1 per cent in the corresponding period in 2016. He said this was mainly due to expansion in the rice sector.
According to Jordan, rice produced in the first half of 2017 was recorded at 349,867 tonnes, an increase of 31.6 percent over production in the first half of 2016.
This noteworthy performance, he said, was attributed to a rise in acreage sown in all regions, especially in Region Five, where acreage sown rose by 30 percent to 42,595.
Overall, the agriculture, fishing, and forestry sector grew by 6.4 percent in the first half of 2017, underpinned by the recovery in the rice industry and improved performance in the fishing industry.
According to Jordan, however, compared to the first half of 2016, rice export earnings declined by US$11.1M to US$77.2M, in the first half of 2017. This, he said, was due to a decline in volume exported despite higher export prices. The Minister, however, noted that due to high levels of production, exports are expected to grow during the second half of 2017, as millers reduce their inventories.
According to the Finance Minister, sugar production fell by more than 12 per cent to 49,606 tonnes at the half year, compared to 56,645 tonnes during the first half of 2016.
“This shortfall was mainly due to no production at the Skeldon estate, because the boilers were unsafe and required significant repairs,” he explained.
He also blamed the shortfall on late supply of critical operating materials such as fertilizer; pest damage, particularly at the Blairmont and Uitvlugt estates; unfavourable weather; and strikes and absenteeism.
As a result, the industry was unable to reap its entire first crop, with approximately 150,000 tonnes of cane being carried over to the second crop of 2017.
Despite the lower-than-anticipated production locally, prices on the international market did see sugar earning better than expected prices, bringing in US$19 million for the first half of the year.
Among other exports, fish and shrimp, as well as and rum and other spirits, and wood products showed significant growth in the first half of 2017, compared to the same period in 2016.