38% GDP growth projection for Guyana in 2023- IMF report

Guyana is currently witnessing a massive economic boom, driven by the government’s ambitious modernisation initiatives, particularly the rapid expansion of the ‘unparalleled’ oil sector.

This was according to an International Monetary Fund (IMF) report released on Monday, following discussions held by its team from August 28 to September 11 during the 2023 Article IV Consultation with local officials.

The report stated that Guyana is poised to sustain its economic momentum in 2023, with a projected Gross Domestic Product (GDP) growth rate of 38 per cent.

This follows a record-breaking 62.3 per cent real GDP growth rate in 2022, the highest globally.

Oil production is on the rise with the coming of a third oil field, the report said.

It went on to say that growth in the non-oil sector is supported by a rapid public investment programme focused on transportation, housing, flood management infrastructure, and human capital development.

Spillovers from oil and construction are also supporting growth in the services and supplies sectors, while agriculture, mining and quarrying are also performing well.

In the first half of 2023, real non-oil GDP grew by 12.3 per cent, with the non-oil sectors growing by 12.3 per cent.

According to the financial institution, “the outlook for medium-term growth is better than ever before.”  Oil production will continue to expand rapidly as three new approved fields will come on stream between 2024-27, and a sixth field is expected to come on stream in the first half of 2028.

“Guyana’s favourable medium-term growth prospects are accompanied by upside and downside risks, the IMF said.

It went on to say, “On the upside, further oil discoveries would continue to improve growth prospects. Construction growth and strong public investment may support higher than expected short-term non-oil growth.”

However, the IMF acknowledged that the negative impact of the adverse climate shocks, and volatile or lower-than-projected commodity prices could have on the economy.

The IMF noted that the fiscal and monetary policy mix is appropriate at this time. Staff views the current expansionary fiscal policy stance as fitting, considering the country’s development needs and the existing slack in the economy.

Despite strong job growth in the oil, services, and construction sectors, the 2022 unemployment rate stood at 12.4 per cent.

The monetary policy effectively complements the expansionary fiscal stance, with broad money growing by approximately 10 per cent through June 2023 (since December 2022) and private sector credit increasing by about 5 per cent in the same period, both trailing the nominal growth of the non-oil economy.

“Although credit to the government is also increasing, it is not crowding out credit to the private sector. Bank of Guyana is monitoring macro-financial risks with eight indicators, including credit-to-GDP measures and the systemic risk matrix.”

According to the statement, the authorities’ commitment to fiscal discipline is welcome and allows for a balanced growth path.

Overall, the IMF stated in the medium term, fiscal adjustments will aim for a balanced budget by 2028, supporting economic growth (averaging 20% annual real GDP growth from 2024 to 2028) while avoiding macroeconomic imbalances. Public investment will rely on oil revenues, gradually reducing public debt as a percentage of GDP (from 43.2% in 2021 to 26% by end-2022).

The real exchange rate will appreciate, and inflation will rise as the economy narrows its development gap. International reserves will grow, bolstering reserves coverage. Additionally, significant savings will accrue in the Natural Resource Fund (NRF) offshore.