IMF concludes article IV consultation with Guyana
Economic growth slowed in 2017, but became more broad-based. The economy grew by 2.1 percent, down from 3.4 percent in 2016, on the account of lower than expected mining output and weak performance in the sugar sector.
The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Guyana and considered and endorsed the staff appraisal without a meeting.
Economic growth slowed in 2017, but became more broad-based. The economy grew by 2.1 percent, down from 3.4 percent in 2016, on the account of lower than expected mining output and weak performance in the sugar sector. Nonetheless, non-mining growth rebounded to 4.1 percent following a contraction in 2016.
Inflation remained stable at 1.5 percent at end-2017, largely driven by food items, while core inflation was close to zero. The external balance turned negative due to weaker than expected export growth and higher oil prices. In 2017, the current account recorded a deficit of 6.7 percent of GDP from a surplus of 0.4 percent in 2016. The financial account improved due to FDI, particularly in the oil and gas sector, and higher loan disbursements to the public sector.
Gross reserve cover stood at 3.2 months of imports at end-2017. The central government’s deficit remained stable at around 4.5 percent of GDP in 2017. Improvements in tax administration contributed to a 1.2 percentage point increase in the tax revenue to GDP ratio, which was partly offset by a 0.4 percentage point decline in the ratio for non-tax revenue. Public debt stood at 52.2 percent of GDP at end-2017.
Credit to the private sector grew 2.1 percent in 2017 due to a combination of weak demand and banks continuing to strengthen their balance sheets. Guyana’s banking system remains relatively stable. Although banks remain profitable and have adequate capital buffers, non-performing loans (NPLs) remain high at 12.2 percent of total loans at end-2017, down from 12.9 percent at end-2016.
Guyana’s medium-term prospects are very favorable. Oil production is expected to commence in 2020, and additional oil discoveries have significantly improved the medium- and long-term outlook. Economic growth is projected to be 3.4 percent in 2018, driven by continued strength in the construction and rice sectors, and a recovery in gold mining.
The current account deficit is projected to narrow to 6.1 and 4.3 percent of GDP in 2018 and 2019, respectively. The deficit will be financed largely by FDI inflows and donor-supported investment. The central government deficit is projected to widen to 5.4 and 5.1 percent of GDP in 2018 and 2019 due to the cost of restructuring the sugar sector and an increase in infrastructure-related capital expenditure. Public debt is projected to rise in the short-term, before declining with the onset of oil production.