By Jarryl Bryan
The International Monetary Fund (IMF) is projecting Guyana’s inflation would continue to rise in 2018. This is a dangerous development, even as the country struggles to shake off the effects of a slowdown in the economy.
According to the IMF in its Regional Economic Outlook Update on Latin America and the Caribbean, economic growth in Guyana is being supported by two large gold mines, a “positive sentiment ahead of oil production.”
According to the IMF, Guyana’s projected output growth (value for goods it produces) for 2017 is 3.5 per cent. For the year 2018 it is 3.6 per cent. But the IMF also projected a 2.6 per cent rise in inflation (rate at which prices for goods and services increase) for 2017, while a 2.7 per cent increase is expected for next year.
Indeed, inflation has been steadily rising over the years, with the financial organisation noting that in 2014 it stood at 1.2 per cent. In 2016 it rose to 1.5 per cent.
“After disappointing growth over the past few years, economic activity in Latin America remains on track to recover gradually in 2017–18, as the global economy gathers steam and recessions in a few countries in the region come to an end,” the IMF stated in the report.
“Long-term growth, however, remains weak, hampering income convergence toward advanced economy levels. Fiscal space to support demand is limited, particularly for commodity exporters. But monetary policy can play a supportive role, because inflation has been moderating rapidly,” it added.
The IMF urged Governments to urgently press ahead with much-needed structural reforms, to ensure that growth is sustained and inclusive. It recommended that countries improve their infrastructure, invest in human capital, encourage more females in the labour force, increase oversight of the labour market, enhance governance and anti-corruption efforts, and take steps to further trade.
The Finance Ministry’s half-year report was released in July of this year. It had stated that inflation, as measured by the Consumer Price Index (CPI) for Georgetown, was recorded at 1.1 per cent in June 2017. According to the Mid-Year report, the main driver of inflation in the first half of 2017 continued to be food prices.
“Prices grew significantly for pulse and pulse products, 14.5 per cent; condiments and spices, 7.1 per cent; cereals and cereal products, 5.2 per cent; oils and fats, 4.3 per cent; and vegetables and vegetable products, 4.1 per cent.
“Prices for transport and communication, medical and personal care; and education, recreation and culture also recorded increases in the first half of 2017,” the report had stated, also expressing optimism that the inflation rate would be kept in check.
The IMF’s observation that Guyana has gold to thank for its economic performance is telling, since the Mid-Year report had revealed mining to be among the sectors on the decline when compared to the corresponding period in 2016. The declining sectors had also included sugar, livestock, forestry, quarrying, and even the bauxite industry.
It showed that sugar production was recorded at 49,606 tonnes at the half-year, and when compared to 56,645 tonnes during the first half of 2016, represented a decline of 12.4 per cent. The livestock industry also contracted by 10.9 per cent in the first half of 2017, due to heavy rainfall severely affecting production, especially in the second quarter.
The forestry industry also showed an 18.2 per cent contraction in the first six months of 2017, compared to the same period in 2016. Declining production within the forestry industry was due to structural changes in the industry.
The mining and quarrying sector contracted by 4.0 per cent, during the first half of 2017. Gold production fell by 1.7 per cent to 317,096 ounces in the first half of 2017, compared to the same period in 2016.
Also, it showed the bauxite industry declined by 11.5 per cent as a result of reduced production of higher valued grades.
