The COVID-19 pandemic has caused significant disruption in the global economy. In the case of Guyana, the Bank of Guyana, in its Half Year Report for 2020, projected that the COVID-19 pandemic would continue to have adverse effects on major economic sectors, resulting in a downward revision of GDP growth. Real oil GDP is expected to grow by 45.9 %. Real non-oil GDP contracted by 4.9% due to declines in the services and construction sectors, while inflation is expected to be low, single digits.
Many Guyanese have been greatly affected by the pandemic, which also had an impact on the economy. Citizens were faced with challenges such as the loss of jobs, resulting in a decline in their spending power, which affected the business and banking sectors immensely. Hundreds, if not thousands, of households were unable to provide the basic necessities for survive on a daily basis. The interior regions of the country suffered most of all, since they are isolated from the city and had limited supply of goods to survive upon as the lockdown was enforced. The entire economy was basically at a standstill.
On September 25, 2020, an emergency budget to the tune of $330B was approved by the National Assembly. Of this $330B, $4.5B was set aside to provide relief to all households, which amounted to $25,000 per family. Guyana has an estimated population of 750,000. If on average, there are 500 households in one village that is $12.5M that will be injected back into the village economy through spending on consumption goods and services. Guyana has many villages. If we estimate that there are about 200 well populated villages, then that would amount to $2.5B. By providing cash grants to these families, they, in turn, would go to the stores to stock up their homes with essentials, which would encourage businesses to reopen and rehire staff as demand and supply increases. This results in rising spending powers along with increased domestic incomes, as jobs are recreated and families are able to earn again to invest into the economy in getting their needs along with paying bills and settling outstanding bank loans and credit terms.
By virtue of Guyana being on the cusp of an economic transformation wherein it just became a petroleum producing state, Guyana has an opportunity to become the driver of a transformative agenda within the region, viz-à-viz an enhanced framework that would foster deeper regional economic integration of South America and the Caribbean with the rest of the world.
This notion is premised against the backdrop of its arguably geopolitically potent location, its emerging petroleum industry, coupled with the increasing global interests in Guyana, especially from the United States, United Kingdom, European Union (EU), Canada, India, and many other countries. Notwithstanding the economic and financial impacts of the pandemic at the onset, Guyana is poised to experience an economic ‘boom’ in the medium to long term outlook. Oil production recently commenced offshore by ExxonMobil in December 2019.
Though there may not be any significant amount of direct employment for Guyanese by the multinational oil companies such as ExxonMobil, there will be a surge in demand for support goods and services, and thus the creation of indirect employment.
It is against these backgrounds, and the high level of investors’ confidence, both local and foreign, that Guyana’s development outlook is extremely positive. These developments have strategically positioned Guyana to lead a regional integration agenda aimed at strengthening South-South cooperation in South America, Latin America and the Caribbean through the auspices of CARICOM and the other regional trading bloc as mentioned herein, within the framework of leveraging the country’s development needs.
Within these respects, for example, Guyana’s geographic location in South America, which places it at an advantage in terms of access routes to the rest of the world, is an important factor that has to be considered in the deep water harbour project and the Brazil-Guyana road link project. These are two key transformative projects that can integrate more South-South cooperation in the area of trade and commerce; which would not only facilitate Brazil’s goods to move through Guyana, thereby creating new industries and commerce, but other South American countries’ goods can be transported through Guyana to access the rest of the world’s markets.
As a region and a sub-continent together, the political leaders of South American countries need to start examining the need for a South American Development Bank to focus on large scale development projects in the member states. In the long term as well, the need to connect the continent through the construction of railways would be necessary if the leaders of South America are serious about deepened integration of the continent, and to cement its role in regional integration in order to conduct business with the rest of the world. To this end, Guyana can become a regional hub for shipping and commerce, mirroring the Dubai and /or Panama models.
The emergency budget and COVID-19 relief cash grant have been set with the aim to revitalising the economy. The COVID-19 cash grant would help the country greatly in having the businesses up and running again, and having jobs recreated to contribute back to the economy. Based on this analysis, one can agree that the Government has put forward a realistic and achievable approach in handling the situation in turning the economy around in 2020, despite the rough landing on August 2, 2020 and formidable challenges in a pandemic environment.
With such foundation being set, the economy is set to take off in 2021 as we remain on the edge of our seats for the 2021 budget, which one can anticipate would position Guyana for resilient and vibrant growth and development – especially with the high steam of foreign investments to the tune of billions of US dollars flowing in. Investors’ confidence is on the rise, evidently and demonstrably so. Guyana has a bright future over the next decade!
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About the Author:
JC. Bhagwandin is an economic and financial analyst, lecturer and business & financial consultant. The views expressed are exclusively his own and do not necessarily represent those of this newspaper and the institutions he represents. For comments, send to [email protected].
