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Guyana - Economy

A coming oil boom is set to transform Guyana, located on the northeastern tip of South America, after ExxonMobil in December began commercial exploitation of a huge 2016 discovery off the coast. The International Monetary Fund expects the country's economy to record the biggest growth worldwide in 2020, a staggering 85 percent. Oil production is currently around 52,000 barrels per day but was expected to grow to 750,000 bpd from 2025.

Guyana’s economy continued to expand, although growth was uneven. In 2016, subdued agricultural commodity prices and adverse weather conditions led to a contraction of agriculture, with negative spillovers to manufacturing and services. Additionally, delays in public investment remained a drag on construction. Nevertheless, GDP was buoyed by very large increases in gold output, including from new mines, with total real GDP increasing by 3.3 percent despite a contraction in non-mining GDP.

In 2017, the IMF projected real economic growth of 3.5 percent driven by an increase in public investment, continued expansion in the extractive sector, and a recovery in rice production. Despite weather-related shocks to food prices and excess demand during Guyana’s Golden Jubilee, inflation remained subdued at 1.5 percent at end-2016, and is expected to be around 2.5 percent at end-2017.

Real economic activity expanded by 3 percent in 2015. Lower export commodity prices and budget delays weighted down on activity, while the opening of two new large gold mines helped support growth. Consumer prices contracted by 1.8 percent in the twelve months ending in December 2015, reflecting lower import prices and a one-off increase in VAT exemptions.

In 2009, the real gross domestic product (GDP) grew 2.3%, compared to 3.1% in 2008. In 2009 the sugar industry experienced modest performance, with a 3.3% production increase that was the result of inclement weather and lower sugar cane yields during the first crop production and a large number of industrial disruptions during the second crop production. The rice industry output increased 9.2%, recording the highest annual production level in a decade and the second-highest production level in the history of the industry. This strong performance was attributed to increased acreage under cultivation, higher yields, favorable weather conditions, and fertilizer assistance from the government. Other crop sectors experienced 5.8% growth in 2009, as a result of the government’s “Grow More Food Campaign” and increased market access. The livestock sector recorded 2.5% growth, which was attributed to improved livestock breeds and more breeding stock.

The mining and quarrying sector recorded mixed performance in 2009, and the sector grew by 0.7%. Gold production increased by 14.7%, spurred by a continued increase in world market prices. The bauxite industry declined by 29%, reflecting a mix of internal and external developments. Diamond declaration declined 14.8%, as a result of productive capacity being diverted to the lucrative gold industry.

The manufacturing sector (excluding sugar processing and rice milling) continued to show mixed performance, with some sub-sectors such as aerated beverages, mineral and distilled water, and stockfeed recording increased production, while the other sub-sectors such as rum and malt-based beverages declined. As a result the manufacturing sector remained balanced in 2009.

The engineering and construction sector recorded a moderate performance resulting in 1.5% growth in 2009, due to an increase in residential construction, lower value-added type construction, and maturing of large construction projects.

The service sector continued to grow strongly in 2009. The transport and communications sub-sectors grew by 2%. The distribution sector grew by 6.6%. Financial services grew 3%, while rental of dwellings grew by 2%. Other services grew by 3%.

The inflation rate was recorded at 3.6% at the end of 2009 as compared to 6.4% at the end of 2008. In 2009, there was a marginal decrease in the value of transactions conducted on the foreign exchange market. The overall volume fell by 2.8% to reach U.S. $4.7 billion, consistent with the reduction in value of external current account transactions. The market adjusted in 2009 and the value of the Guyana dollar appreciated by 0.97% against the U.S. dollar.

The merchandise trade deficit decreased to U.S. $401.1 million in 2009 from U.S. $522.1 in 2008. This reflected a reduction in the value of imports.

Export receipts in 2009 amounted to U.S. $768.2 million as compared to U.S. $801.5 million in 2008. This reduction was a result of external price factors. Gold export earnings increased by 38.3% to U.S. $281.7 million as a result of higher production, 24.4% increase in export volumes, and 11.2% increase in average export prices. Bauxite export earnings decreased by 39.3% to U.S. $79.5 million, as a result of external market conditions. Sugar export earnings declined by 10.2% to U.S. $119.8 million, because although the volume of sugar exported increased by 3.4%, the average export price of sugar declined by 13.1%. Rice export earnings decreased by 3.3% to $114 million, because although the export volumes increased by 32.9%, the average export price declined by 27.3%. Guyana's primary export markets in 2009 were: Canada (26.5%), the U.K. (13.7%), U.S. (12.3%), Ukraine (6.3%), Jamaica (4.9%), Netherlands (4.6%), Germany (4.2%), Trinidad and Tobago (3.7%), Barbados (2.1%), and Belgium (1.8%).

The value of merchandise imports in 2009 decreased by 11.7%, to $1.2 billion. The decrease reflected activities associated with a 32.5% decrease in the value of imported fuel and lubricants. Other imports decreased by 1.8%, with non-fuel immediate goods declining by 10.3%, while consumption goods increased by 2.9% and capital goods increased by 1.7%. Guyana's primary imports in 2009 were from the U.S. (28.7%), Trinidad and Tobago (19.6%), Venezuela (6.9%), Suriname (5.3%), China (5.1%), the U.K. (3.7%), Japan (3.6%), Finland (2.4%), Canada (2.3), and Netherlands (1.8%).

The stock of domestic debt and external public debt amounted to U.S. $422.3 million and U.S. $933.0 million, respectively. Domestic and external public debt increased by 16% and 12%, respectively, at the end of 2009. The former is attributable to an increase in the issuance of treasury bills to sterilize excess liquidity, while the latter is due to increased disbursements from multilateral and bilateral creditors. Domestic debt services decreased by 28.75% to U.S. $20.9 million and external debt services decreased by 14% to U.S. $17.5 million as a result of lower principal payments.

A discovery of oil in disputed territory set off a diplomatic dispute between Venezuela and Guyana in June 2015. Transnational oil company Exxon Mobil reported that it had made a significant oil discovery in an area disputed by the two countries. ExxonMobil thinks that its discovery could hold as much as 700 million barrels of crude. Although it may be too early to tell if ExxonMobil can ultimately recover that much oil, the discovery in the Stabroek Block could be worth as much as $40 billion at current prices.

Guyana Sugar Corporation (GuySuCo) was the backbone of Guyana’s economy. Production rose to an average above 250,000 tons in the 1990s and even surpassed 300,000 tons on several instances in the 1990s before encountering difficulties beginning in 2010. These difficulties followed the EU’s arbitrary 36% reduction of the price for sugar, the impact of climate change and the need for accelerated mechanization.

Currently, Guysuco is the largest employer of roughly 18,000 employees, one of the major sources of foreign currency, and a major provider of community healthcare services. There were real problems affecting Guysuco, including production challenges, low productivity, high cost of production, lack of competitiveness, and arguably the worst forms of management corruption.

Transfers to the GuySuCo were equivalent to 1.8 percent of GDP in 2015 and were budgeted at about 1.3 percent of GDP for 2016. The restructuring of GuySuCo aimed to reduce inefficiencies and place operations on a financially sustainable footing. One underperforming sugar estate had been targeted for closure and planned budget transfers for 2016 have been reduced by 25 percent. The company intended to transition to a new business model that would ensure its long-run viability. The re-engineering of the Guyana Sugar Company (GuySuCo) to a new business model aimed to reduce inefficiencies and place operations on a financially sustainable path.

According to the ‘State Paper on the Future of the Sugar Industry’ released 08 May 2017, the government planned to “scale down” the Guyana Sugar Corporation (GuySuCo) to three estates with three factories that would produce sugar for domestic needs and foreign markets, while divesting the company’s remaining assets, including the troubled Skeldon Estate.

Guyana’s vast tracts of productive land present enormous opportunities for growth. Agriculture is the most important productive sector of Guyana’s economy. Agriculture accounts for approximately one-third of Guyana’s Gross Domestic Product (GDP) and 30% of the country’s employment. However, in recent years, the sector has been affected by volatility in international commodity prices and extreme weather events, which have contributed to a challenging environment for agricultural sector development.

Although Guyana’s mature sugar and rice industries will continue to play an important role in Guyana’s economy, the non-traditional agriculture sector is beginning to show high growth potential. For example, agro-processing exports (prepared food, molasses) experienced significant growth within the last five years. There was also an increase of exports in the prepared foods market (jams and jellies, coconut milk, spices, pasta, etc.). With investments in production, facilities, quality assurance, and processing, non-traditional agriculture could become an engine of export growth.

Sugar and rice cultivation form part of the national psyche. The sugar industry employs over 25,000 persons directly and therefore provides a livelihood for at least 125,000 persons. Sugar generates 30% of Guyana’s foreign exchange and saves millions in displacing expensive fuel by its use of bagasse waste for energy and a unique system of water transport of harvested canes. Community services and infrastructure in the country areas depend on sugar while the industry provides rural stability and keeps in check the increase in urban overcrowding with all its attendant problems.

Restructuring sugar management is on the move with the Skeldon Modernisation Plant coming on stream. This will reduce cost of production of a pound of sugar while increasing the industry’s competitiveness. This estate will also house a power generation facility, a distillery and a bagasse plant. This modern sugar factory will produce high quality raw sugar tied to an increasingly attractive demand internationally.

Bagasse will produce an average of 10 megawatts of electricity up to 77 gigawatt hours annually. Bagasse is expected to replace use of light and heavy fuel oil in diesel engine-driven generators powered by the Guyana Power and Light Company.

The rice industry represents a way of life for many of Guyana’s people and has deep roots in the history of Guyana. Rice is the second largest agricultural sub-sector in Guyana, second only to sugar. Guyana’s economy, and indeed stability, is heavily dependent on the health of its agricultural sector and, by extension, on the rice industry. Rice accounts for approximately 4% of the GDP of Guyana. Close to 70% of Guyana’s rice is exported and represents approximately 11% of Guyana’s foreign exchange.

This industry incorporates many stakeholders, farmers, millers, exporters, consumers. input suppliers, transport providers and the public sector as a whole. Production is carried out by private small scale farmers. Approximately 10,000 rice farm families depend directly on rice for their livelihood. In addition there are 105 privately owned rice mills in Guyana. Taken as a whole close to 100,000 persons rely on this vital industry.

Guyana has the ideal conditions for a dynamic seafood and fisheries industry. These include a 459 km Atlantic coastal zone and an extensive network of rivers. The U.S. is the primary market for most seafood exports. In 2004, however, Guyana was certified to export seafood to the lucrative EU market, creating a range of new market opportunities. While the seafood industry primarily consists of marine species caught in Guyana’s exclusive economic zone (EEZ), aquaculture has recently attracted significant investment growth.

Guyana enjoys vast fishery resources in the Atlantic Ocean, both in its coastal areas and its EEZ, about 138,240 square kilometers— the equivalent to 64% of the country’s landmass. This area contains highly productive marine fisheries that include prawns (Penaeuslatisculcatus), shrimp (Penaeuslitopenaeusschmitti), seabob shrimp and a variety of commercial finfish. Although some segments of the marine sector (e.g. prawns, shrimp and seabob shrimp) are relatively consolidated and face uncertain sustainability (in terms of volume of catch), a number of lucrative opportunities exist, particularly in terms of adding value to existing resources.

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Page last modified: 04-03-2020 14:13:43 ZULU