Foreign trade has become more important to our economy in recent years. Exports have remained flat, and imports of goods and services have grown rapidly, resulting in the growth of the merchandise deficit. Such a consistent adverse trade gap has contributed to stagnation in the people’s standard of living in several ways, but my focus here will be limited to the impact of the trade balance on Guyana’s international reserves, its gross domestic product, and by implication its job market.
As we all are aware, G.D.P and employment generally move in the same direction, so what I am saying about the impact on G.D.P generally applies to employment as well.
G.D.P. is the way economists calculate how much an economy is producing in total goods and services. Higher exports and lower imports add to G.D.P., while declining exports and higher imports contract G.D.P. In Guyana, we have a case where our agricultural exports are in serious trouble.
The Minister of Finance, in his prematurely presented FY 2018 National Budget in November 2017, declared that national exports in 2017 increased by US$1.5 million. However, the 2017 year-end export figures provided by the Minister were nothing else than BOGUS. The actual 2017 exports reflect a position that shows a decline of approximately US$15 million.
On the other hand, imports expanded by US$138.5 million over 2017. This drove the overall deficit in the balance of payments for the nation to negative US$64 million. This serves as a contractionary force on the growth of the economy. How was this gap funded in 2017?
The graph above clearly illustrates that the international reserves within the Bank of Guyana (in blue) as well as in the Banking System (in red) are being plundered to feed this rapacious appetite for imports, which is not backed by adequate productive exports.
Let me be clear: this decline started since the Ramotar days, but what is gravely disappointing is that Mr. Granger promised change and a better life. Mr. Granger promised to cut corruption and fix the six sisters (rice, sugar, bauxite, gold, seafoods, forestry). The reality is that he has done no such thing, and all his words on the 2015 campaign are proving to be extremely economical with the truth.
Actually, under the short Granger tenure, corruption has gotten worse, and the six sisters are now on their knees.
Since Mr. Granger became President, the gap between imports and exports has become even more unstable, with an average deficit of about US$53 million. This does have a grave negative impact on the economy. Even the remittance inflows from the Diaspora cannot stem this financial outflow from the economy. So Mr. Jordan has to revert to budgetary gimmicks, such as an early budget with guess-figures as a tool to fool the people.
A careful study of Mr. Jordan’s menu of public policies will illustrate that he has taken very little, if any, progressive action on the productive economy (housing, agriculture, manufacturing, mining). Most of these sectors are underperforming, and he seems not to care; so this economic deterioration will not change in 2018.
So where is this growth really coming from? The services sector, which in Guyana’s case is nothing but a statistical illusion that moves the same money from one pot to the next, similar to musical chairs.
So the Granger regime has reverted to selling the people the snake oil illusion that the production of oil will solve everything. But anyone who properly applies their mind to the issue will know that this is furthest from the truth.
First off, because of that intellectually bankrupt oil contract in the Stabroek Block, the people will see very little of that oil wealth in their pockets.
Secondly, stable oil productions are at least 4 years away. So, over the next 4 years, those living in Guyana must settle themselves for some hard years.
The only solution between today and 2021 is to focus on the productive sectors. As an example, it is time for some innovative ideas, like a homegrown clay brick factory to support the housing sector. But do not count on GOINVEST to help, because they are out to sea on the whole question of incentivizing investments and closing the deals.
So, in the final analysis, the G.D.P. will continue to flatten (if this trend continues, in 2018 it is expected to come in at 1.9%) and that will have a terrible effect on the job creation front. And the story continues! Wither the economy under President Granger?
