IMF Executive Board Concludes 2019 Article IV Consultation with Guyana
IMF News, September 17, 2019
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- Published: September 17, 2019
Economic performance and inflation
- Real GDP grew by 4.1 percent in 2018, up from 2.1 percent in 2017, with expansion led by construction and services sectors.
- Inflation remained low at 1.6 percent at end-2018.
- Economic growth is projected at 4.4 percent in 2019, extending broad-based expansion across all major sectors.
External sector developments
- The external current account deficit rose to 17.5 percent of GDP in 2018, from 6.8 percent in 2017, due to weaker exports and higher imports related to oil production.
- The current account deficit is estimated to rise to 22.7 percent of GDP in 2019 on the back of higher imports related to oil production, largely financed by foreign direct investment (FDI) in the petroleum sector.
- Gross official reserves: 598.5 (2015), 596.7 (2016), 584.0 (2017), 528.4 (2018), 643.0 (2019 preliminary), 857.8 (2020 projections).
- Months of imports of goods and services: 2.6 (2015), 1.8 (2016), 2.4 (2017). (Note: gross reserves in months of imports for 2017 onward are affected by high value imports of oil goods and services.)
- Memo: External current account values (levels) shown as -163.0 (2015), 13.2 (2016), -246.2 (2017), -683.3 (2018), -935.7 (2019), -1,483.6 (2020).
Public finances and debt
- Central government deficit: central government deficit came in at 3.5 percent of GDP in 2018, lower than the budgeted 5.4 percent of GDP.
- Central government revenue: 24.6 (2015), 24.5 (2016), 26.2 (2017), 26.9 (2018), 28.0 (2019), 18.5 (2020 projection).
- Central government expenditure: 27.0 (2015), 30.0 (2016), 32.2 (2017), 31.6 (2018), 34.3 (2019), (current) 22.4–26.1 and capital 4.6–8.1 across years as in table.
- Overall balance (after grants): -1.4 (2015), -4.4 (2016), -3.5 (2017), -5.0 (2018), -0.7 (2019).
- Total public sector gross debt: 50.1 (2015), 50.7 (2016), 51.4 (2017), 52.9 (2018), 55.4 (2019), 29.3 (2020 projection).
- External debt: 35.7 (2015), 33.2 (2016), 34.4 (2017), 33.9 (2018), 18.4 (2019), Domestic: 14.4 (2015), 17.6 (2016), 16.9 (2017), 19.0 (2018), 22.2 (2019).
- Note: Since 2015-16, public debt to GDP ratios have been adjusted to reflect unsettled government balances at the central bank; ratios do not include publicly-guaranteed debt.
Oil prospects and medium-term outlook
- Oil production is on schedule to begin in early 2020; commencement of oil production in 2020 will substantially improve Guyana’s medium- and long-term outlook.
- The oil sector is projected to grow rapidly, accounting for around 40 percent of GDP by 2024.
- Oil revenues are expected to support additional fiscal spending annually of 6.5 percent of non-oil GDP on average over the medium term, to help meet critical social and infrastructure needs.
- Public debt and the external current account deficit are projected to decline steadily following the onset of oil production.
- Caution: Projected real GDP growth in 2020 is potentially overstated and subject to large subsequent revisions because of the very high growth rate of oil GDP, which in turn is elevated on account of the very low (zero) base in 2019. Work is ongoing to rebase the real GDP series to account for oil-related activities since 2015 in advance of actual oil production in 2020.
Executive Board assessment — opportunities, risks, and policy recommendations
- Directors welcomed Guyana’s broad‑based economic expansion underpinned by prudent macroeconomic policies and noted the favorable medium‑term outlook, while highlighting that oil production presents opportunities and challenges.
- Fiscal framework and Natural Resource Fund (NRF)
- Welcomed NRF legislation for managing oil wealth and emphasized need to complement it with a fiscal responsibility framework to avoid fiscal deficits.
- Commended NRF framework’s aim to save resource income for future generations and contain pickup in public spending.
- Called for authorities to constrain the annual non‑oil deficit to not exceed the expected transfer from the NRF; this rule could be phased in over the next three years to allow a smooth widening of the non‑oil deficit (in relation to non‑oil GDP).
- Monetary and exchange rate policy
- Agreed monetary policy should gradually revert to a neutral stance to contain potential inflationary pressure as public spending increases, economic growth strengthens, and credit expands.
- Recommended developing infrastructure for greater exchange rate flexibility within the monetary policy framework over the medium term to sustain growth, maintain price stability, and facilitate adjustment to oil price and other external shocks.
- Transparency, governance, and anti‑corruption
- Noted continued progress in strengthening transparency and governance and encouraged implementation of recommendations of the 2019 Extractive Industries Transparency Initiative Report.
- Supported strengthening anti‑corruption frameworks, including facilitating the work of the Integrity Commission, and addressing institutional capacity weaknesses to enable decisive implementation of policy actions.
- Public financial management and public investment
- Emphasized need to further improve quality, efficiency, and transparency of public financial management.
- Recommended addressing shortcomings identified by the 2017 Public Investment Management Assessment (PIMA) and expenditure review before public investment is significantly scaled‑up with oil revenues.
- Financial sector and AML/CFT
- Recommended an asset quality review to assess credit quality of banks with high nonperforming loans.
- Welcomed progress on implementing the 2016 FSAP recommendations and encouraged completing the remaining ones.
- Noted progress in strengthening the AML/CFT framework and called for further efforts.
- Structural reforms and inclusiveness
- Encouraged using oil revenues to undertake structural reforms to support economic diversification, tackle skilled labor shortages, and achieve inclusive and equitable growth.
- Priority reforms: address infrastructure bottlenecks; upgrade the education system; promote more flexible working arrangements to increase female labor participation; improve the business environment and enhance competitiveness; develop climate‑resilient infrastructure networks.
Key social and economic indicators (selected figures)
- Population, 2018 (thousands): 782
- Life expectancy at birth (years), 2017: 66.8
- Population not using an improved water source (%), 2015: 4.9
- Under-five mortality rate (per 1,000 live births), 2017: 31.3
- Gini index, 1998: 44.6
- Population living below the poverty line (%), 2000-06: 35
- HDI rank, 2017: 125
- Real GDP (annual): 3.1 (2015), 3.4 (2016), 2.1 (2017), 4.1 (2018), 4.4 (2019), 85.6 (2020 projection)
- Real GDP per capita: 2.7 (2015), 2.5 (2016), 1.5 (2017), 3.6 (2018), 85.1 (2020 projection)
- Consumer prices (average): -0.9 (2015), 0.8 (2016), 1.9 (2017), 1.3 (2018), 3.3 (2019)
- Consumer prices (end of period): -1.8 (2015), 1.6 (2016), 3.5 (2017)
- Terms of trade: 19.7 (2015), 12.1 (2016), -10.3 (2017), -8.7 (2018), 2.0 (2019)
- Domestic credit of the banking system: 12.3 (2015), 7.8 (2016), 10.8 (2017), 9.9 (2018), -2.7 (2019)
- Broad money growth: 3.7 (2015), 5.4 (2016), 6.0 (2017), 8.4 (2018), 13.5 (2019)
- Nominal GDP (G$ billion): 660.2 (2015), 723.6 (2016), 744.6 (2017), 805.7 (2018), 852.4 (2019), 1,678.0 (2020 projection)
- Per capita GDP, US$: 4,168 (2015), 4,531 (2016), 4,636 (2017), 4,984 (2018), 5,252 (2019), 10,249 (2020 projection)
- Guyana dollar/U.S. dollar (period average): 206.5 (2015), 206.7 (2016)
IMF Executive Board Concludes 2019 Article IV Consultation with Guyana — Press Release No. 19/332, September 17, 2019
