Local economy can expand by 86% in 2020 – IMF

DPI, Guyana, Monday, November 4, 2019

Guyana can see its economy grow by a further 86% next year after expanding by 4.4% this year, according to the International Monetary Fund (IMF). That is 14 times the projected pace of China and driven by ExxonMobil’s discovery of oil.

“We’re moving from a very low base to a stratospheric leap,” Minister of Finance Winston Jordan said in an invited comment.

While Guyana’s annual gross domestic product is $4Billion, it will expand to about $15Billion by 2024, according to the IMF.

According to the Finance Minister, the government plans to use some of the money derived from its royalties to build highways to connect coastal towns to the sparsely populated interior, which has gold, diamond and bauxite deposits.

The IMF report calculated that the oil sector will represent about 40% of the economy within five years. The government expects the initial $300M a year in revenue from profit-sharing and royalties to more than double after a second offshore well starts production around 2022. That money will go directly to the Sovereign Wealth Fund (SWF) which was established this year, and will be used for “inter-generational” savings, to protect against oil price swings, and to fund development plans,” Minister Jordan explained.

The IMF says its forecast may be subject to large revisions since even small changes to the projected oil output in 2020 would result in significant swings in the overall economic performance. ExxonMobil has partnered with Hess Corporation and China’s CNOOC Limited to develop one of the world’s largest new deep-water oil discoveries off Guyana’s coast.

According to ExxonMobil, it will begin pumping from its first well next month, and by 2025, will be producing at least 750,000 barrels a day. TOTAL SA, Tullow Oil Plc and Repsol SA are also among the companies exploring for oil in Guyana’s waters.

The IMF had projected the 4.4% growth in the local economy, which it said was driven by continued strength in the construction and services sectors ahead of oil production in 2020.

The projection was made by an IMF mission, led by Arnold McIntyre, which visited Georgetown in June this year, and held discussions for the 2019 Article IV Consultation. The team had met with Prime Minister, Hon. Moses Nagamootoo, Finance Minister, Hon. Winston Jordan, Minister of Legal Affairs and Attorney General, Hon. Basil Williams S.C., Central Bank Governor, Dr. Gobind Ganga, other senior officials, representatives from the private sector, banks, the opposition party, labour unions, and other stakeholders.

The mission reported that real GDP grew by 4.1% in 2018, up from 2.1% in 2017, led by the construction and services sectors. It said inflation remained steady at 1.6% at the end of 2018, on the back of stable food prices and exchange rate.

According to the report, the commencement of oil production in 2020 presents an opportunity to scale-up capital and current spending at a measured pace over the medium term, to address infrastructure gaps and human development needs, while attenuating debt sustainability concerns at the same time.

On June 27 2019, the NASDAQ released a ranking of the five fastest-growing economies in the world. Guyana topped that list with a 16.3% growth rate over four years, from 2018-2021. As for Guyana’s gross domestic product (GDP) NASDAQ predicts that the 2019 GDP growth rate will be 4.6% and expects that in 2020 and 2121, the economy will grow by 33.5% and 22.9% respectively.