- Guyana’s oil-fuelled economy triples in size
According to the International Monetary Fund (IMF), Guyana’s economy has tripled in size since it began extracting oil in late 2019.
The information was made public on Monday, following the IMF’s Article IV meeting with Guyana.
“The Guyanese economy continues to grow at a rapid pace, aided by the government’s modernization plans and unprecedented oil and gas sector expansion.” “Overall real GDP growth is projected to be 38.4 percent in 2023 and 20 percent per year on average from 2024 to 2028,” according to the IMF.
“Guyana’s very favourable medium-term growth prospects are accompanied by upside risks, the most important of which are additional oil discoveries, which would further improve growth prospects, and downside risks, which include inflationary pressures and an appreciation of the real exchange rate above the level implied by a balanced expansion of the economy.” Adverse climate shocks, as well as volatile or lower-than-expected commodity prices, may have a detrimental influence on the economy.”
According to the IMF, one of Guyana’s main challenges will be to manage its huge revenue inflows “to ensure macroeconomic stability and sustainability while investing steadily in people, physical infrastructure, and institutions.”
The IMF has deemed Guyana’s 2023 policy mix appropriate, as the government increases spending to meet the country’s large development needs while also growing non-oil GDP.
“The authorities’ fiscal discipline is welcome, as it allows for a balanced growth path, with moderating fiscal impulses projected to achieve a zero overall fiscal balance by 2028.” “The IMF expects gross international reserves and substantial savings in the National Resource Fund to continue to accumulate in the medium term.”
The IMF advised Guyana to implement a comprehensive medium-term fiscal framework (MTFF).
“As a fiscal anchor, staff recommend establishing a path for the non-oil primary balance (as a percentage of non-oil GDP) that is consistent with the ceilings on oil revenue withdrawals from the NRF that aim to ensure intergenerational equity.” The medium-term fiscal framework should be further modernised in the MTFF to include a defined medium-term fiscal anchor, a transition path, and an operational aim. Staff recommends “periodic expenditure reviews to ensure macroeconomic stability and competitiveness by setting the pace of public investment to account absorption and institutional capacity constraints of the economy,” according to the report.
The IMF has also advised Guyana to continue closely monitoring its macroeconomic and financial indicators. Guyana was recommended to tighten monetary policy and employ macroprudential instruments if warranted.
