Latest update April 19th, 2024 12:59 AM
Sep 12, 2022 News
Kaieteur News – Government’s mid-year economic report when examined over the past four years, has revealed frightening statistics- with eight of this country’s major sectors suffering rapid decline, which started in 2019 and has worsened to date.
Just over a week ago, the Ministry of Finance published the 2022 half-year report, underlining the country’s performance in the first six months of the year. Since then, the political Opposition and voices from the Government have been at odds on whether the dreaded “Dutch disease” have indeed made its way into Guyana- This phenomenon refers to the rapid development of one sector of the economy (particularly natural resources like oil) which leads to a decline in growth of other sectors.
An analysis of the document done by this newspaper shows that eight contributors to the nation’s Gross Domestic Product (GDP) have declined between 2019 and 2022; these include sugar, rice, other crops, livestock, forestry, gold, manufacturing and the services sector- other economic activities such as financial and insurance transactions have also been reduced as well as the real estate, wholesale, and retail trade sectors.
According to the report, the fisheries sector this year performed better than last year during the mid-year study, while bauxite production during the first half of this year was equivalent to its output during the same period last year. In the meantime, the other mining/quarrying sector saw an increase in output along with the petroleum sector.
Consistent declines
An examination of the Government’s report indicates consecutive contractions for the sugar industry- which in 2019 accounted for 0.4% of the country’s GDP at half-year, 0.3% in 2020, 0.2% in 2021 and 0.1% in 2022. Rice in 2019 contributed 5.3% to the country’s GDP at mid-year, 3.7% in 2020, 5% in 2021 and only 2% this year.
In 2019 during the first six months, other crops accounted for 14.5 percent of the country’s GDP, 9.5% in 2020, 7.7% in 2021 and 7.5 percent at half year in 2022.
The Ministry of Finance mid-year report also explains that livestock in 2019 added 2.5% to the growth rate,1.6% in 2020 and 2022 but reduced to 1.3% this year. In 2019, the forestry sector recorded a 0.9% production rate at half year which dropped to 0.5% in 2020, 0.4% in 2021 and a further 0.3% in 2022.
Gold mining back in 2019 was thriving, accounting for a whopping 10.5% of the country’s growth. This reduced to 7.4% the following year and 5.1% in 2021. This year, gold mining only accounted for 3.8% of the total GDP. Similarly, the manufacturing sector moved from 5.2% at half-year 2019 to 3.6 in 2020. In 2021, the sector declined to 3.5% and this year it only accounted for 2.3% of the country’s total GDP. In 2019, the Services sector accounted for 42.3% of the country’s GDP, in 2020 it reduced to 28% and by 2021 it again lowered to 26.7%. In 2022, this sector at half-year only accounted for 19% of Guyana’s GDP.
Growth
Meanwhile, consistent growth between 2019 and 2022 could only be spotted in the other mining/ quarrying sector and the blossoming petroleum industry. In 2019, Government said petroleum and gas and support services accounted for a mere 1.1% of GDP at half year. In 2020, this jumped to a 35.4% and a further 40.8% in 2021. This year, the sector accounted for a whopping 54.9% of the country’s total GDP. The document goes on to highlight that in 2019 the other mining/ quarrying sector contributed 1.6% to the GDP. This dropped to 0.5% in 2020 but in 2021 it moved up to 0.7%. In 2022, the sector contributed 0.9% to the overall GDP.
Dutch disease?
The Government underlined key reasons for the noticeable decline in performance for the various industries. Amongst its reasons were inclement weather, reduced declarations, mechanical issues and even labour challenges. The Opposition however is adamant that the decline is a sign of the ‘Dutch disease’. Following the publication of the report, the Opposition’s spokesperson on Economics, Elson Low said: “We need as a nation to ensure that we have a diversified economic base so that if, heaven forbids, there is another oil price shock…we do not see (the) nation’s revenue dry up and other industries become neglected, we also don’t have revenues from those industries to shore up the Government’s budget and the overall economic performance of the country.”
The Economist noted that the decline in performance of Guyana’s major traditional sectors is alarming and requires attention. Even before the PPP released its mid-year performance, former Finance Minister Winston Jordan had already suspected the presence of the ‘Dutch disease’ in Guyana. To arrive at this position, Jordan used one of the latest reports of the Inter-American Development Bank (IDB) which projected that for 2022, Guyana’s oil and gas resources will account for almost 60 percent of Gross Domestic Product (GDP), clearly outstripping the contributions of the other traditional sectors such as rice, sugar, bauxite, timber and gold. Taking this level of domination into account, along with the heightened cost of living pressures, the former Finance Minister, was certain the phenomenon was already established.
In an interview with this newspaper in August, Jordan intimated that the Government’s incessant ‘diversification talk’ does not change the fact that the contributions of other sectors are declining due to what he believes is a clear case of economic mismanagement. Jordan reasoned that there is only so much blame that the Government can throw at the feet of the COVID-19 pandemic and the Russia-Ukraine war. “Yes, those things do contribute to the economic strain but they cannot be blamed entirely,” Jordan stated.
Further, in June this year International Lawyer, Melinda Janki, while appearing as a panelist on a ‘Moray House’ discussion on a review of oil, gas and the environment also said that Guyana may already be in the middle of an oil curse. She explained during her presentation that four years ago when she pronounced that oil would make Guyana poorer, rather than richer, the population was opposed to her comments. However, Janki said today, the reality could not be clearer as it is quite evident that the promised wealth from the oil and gas sector is yet to arrive.
In fact, she pointed out, “Guyana is racking up debts that have to be paid to Exxon out of Guyana’s oil and so this vast wealth that we were promised will never arrive. We are seeing the environmental harm, Liz (the moderator) referred to the loss of livelihoods for the fishermen, the cost of living has gone up but not wages and we are now probably in the midst of the oil curse. A tiny elite is getting richer but the majority of people look to be getting poorer. The Government is over spending, borrowing money (and) burdening future generations with debt…”
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Apr 19, 2024
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