Return to democracy a factor in 16% IMF projected growth – Finance Minister
…says world recognises Guyana back on right track
Minister of Finance Dr Ashni Singh
The recent projection by the International Monetary Fund (IMF) that Guyana’s economy will grow by 16.4 per cent in 2021 is the product of the return to democracy and political and economic stability.
This is according to Finance Minister, Dr Ashni Singh, who was unsurprised by the development, which the IMF made known in its biannual “World Economic Outlook”, when questioned about it by the media on the sidelines of an event on Wednesday.
According to the Finance Minister, the IMF’s previous assessments came at a time when Guyana was in political turmoil brought on by the former A Partnership for National Unity/Alliance For Change (APNU/AFC) Government’s refusal to demit office.
“At the time the IMF would have done their forecast on the Guyanese economy, around September 2020, there would have been a lot of uncertainty and perhaps less clarity on where the country was going and what prospects and opportunities there would be. Since then, of course, things have been clarified. We had a government assume office in August of 2020.
“We’ve had two budgets, which have now outlined the Government’s economic and fiscal plans. Those, of course, helped to resolve any policy uncertainties that might have existed. The two budgets have sent a clear signal of where our Government is taking economic policies and what our intentions are. And with the benefit of the clarity of signal that we would have sent, I’m not surprised of the upward revision of the growth outlook of the IMF,” he said.
According to the Finance Minister, the IMF projection reflects the growing optimism that has returned to the Guyanese economy. He recalled that the uncertainty in the non-oil economy dates back to when the former APNU/AFC Government fell to a No-Confidence Motion in the National Assembly in December 2018.
“What that reflects is the remarkable optimism that has returned to the Guyanese economy. For a long period, the reality is that the Guyanese economy has been beset by severe uncertainty going all the way back to December 2018, when the No-Confidence Motion was passed.
“From the time the No-Confidence Motion was passed, there was some amount of political uncertainty of what will happen. Initially, everyone expected an election would be held within 90 days. That did not happen. And then there was the back-and-forth with various court matters.”
He also pointed out that during that time, a number of projects and foreign investments were put on hold, as many adopted a “wait-and-see” stance on Guyana’s political scene – a stance that only abated when President Dr Irfaan Ali was sworn in as President in August 2020.
“So, the return to democracy in August 2020 and the clarity of the policy signals sent by both budgets would clearly have conveyed to the rest of the world that Guyana is once again back on track, is open for business. Lots of the projects that were put on pause have now restarted,” Dr Singh noted.
It was only recently that another international financial institution reported that Guyana was the sole Caribbean country with positive Gross Domestic Product (GDP) growth in 2020. This is according to a recent World Bank report that shed light on how Latin American and the Caribbean economies fared in 2020.
According to the World Bank 2021 report, “Renewing with Growth. LAC Semiannual Report”, Guyana was able to do what 27 other countries in the Region could not – record GDP growth, notwithstanding the COVID-19 pandemic.
“Despite the COVID-19 crisis, Guyana’s GDP grew by more than 20 per cent in 2020, as the exploitation of very large oil discoveries started. More modestly, Paraguay’s GDP emerged almost unscathed from the crisis, although this sturdy economic performance was not sufficient to prevent a new wave of social unrest,” the report said.
The IMF growth projection is a more conservative estimate than the one the Government had. With the measures announced in the 2021 budget, the Finance Minister had said in February that Guyana’s real GDP is projected to grow by 20.9 per cent, with the non-oil economy growing by 6.1 per cent.
However, he explained that the projection was premised on the assumption that a reopening of the economy takes place with COVID-19 restrictions being gradually lifted and was, therefore, subject to significant downside risks. Similarly, the agriculture, fishing and forestry sector is expected to expand by 5.6 per cent while the mining and quarrying sector is projected to grow by 39.1 per cent.