Friday, October 14, 2011

UK international monitoring group lauds Guyana’s positive economic growth

THE third quarter report of the United Kingdom (UK) based Business Monitoring International (BMI) Latin America Monitor, released this month, has lauded Guyana’s positive outlook for the economy following strong real GDP growth of 5.9 per cent in the third quarter of this year. It said, too, that despite impressive output performance for the second quarter of 2011, it is happy to hold to its 2011 end-of-year forecast for the Guyanese economy.
That is, real GDP growth of 4.5 per cent as the sugar industry continues to encounter difficulties and the threat of a global slowdown begins to resurface.
The BMI said: "We maintain our positive outlook for Guyana’s economy following strong real GDP growth of 5.9 per cent in Q111 (third quarter), according to the fifth mid-year report presented by the Finance Ministry to the National Assembly. That said, we expect real GDP growth to be moderate in subsequent quarters and accordingly maintain our end 2011 forecast of 4.5 per cent.”
It noted that, while this is below the Guyanese Government's forecast, it is likely to be the best in the Caribbean for the year.
"Strong production figures are largely to account for Guyana’s increased GDP, with the non-sugar sector recording record breaking gains. Rice production, in particular achieved remarkable growth, with the first crop production at 207,514 tonnes - a 23.3 per cent increase," the compilation said.
It attributed that growth to significantly improved drainage and irrigation through Government investment, the development of a new rice strain planted by the Guyana Rice Development Board (GRDB) and a higher acreage of paddy cultivation.
"Our commodities team expects rice prices to enter a sustained rally, overcoming months which should keep earnings here supported.”
The compilation said gold production also increased, yielding the dual benefit also of elevated global prices, producing 163,413 ounces, 14.9 per cent more and robust global prices should keep investments in this sector steady over the next 18 months.


"Bauxite production increased by 38.6 per cent in the first half of the year to 0.74 million tonnes, although the composition of the output (higher proportion of lower grade to higher grade) converts into sub-sector growth of 13.8 per cent,” the documentation said.
The BMI said, in its view, construction in Guyana expanded by 4 per cent in the second quarter, engineering activity rose by 4.0 per cent in the first half of 2011 while imports of materials and building related public investment continued to reflect strong growth.
"The sector is now targeting a growth of 5.5 per cent and we believe that is in line with our forecast for 4.5 per cent real GDP growth by end 2011 and 4.0 per cent in 2012. The Construction Sector should continue to fare well over the next 18 Months," BMI assured.
“We maintain our core view that a slow and steady path to fiscal improvements remains the mostly likely scenario for Guyana, forecasting the deficit to stay flat for year end, before decreasing to 3.6 per cent of GDP in 2012 and 2.4 per cent for 2013," BMI stated.
The report continued:"We expect a People's Progressive Party/Civic victory (in November) to anchor policy continuity over the next five years, although a win by the People's National Congress Reform (now A Partnership for National Unity) could encourage us to revise our forecast."
BMI said it recognised the agreement, signed between the Government of Guyana and the Organisation of American States (OAS) in September, on the privileges and immunities of the Electoral Observation Mission for the elections on November 28.


"We believe that the observation mission should help to improve the prospects of a fair and democratic election, in addition to the reopening of the Media Monitoring Unit of the Guyana Elections Commission, following an allocation of G$10M, which will fund the unit’s operations until year end. Guyana’s short term political risk rating stands at 59.8," the report said.
It noted, as well, that production in the livestock industry was targeted to remain stable through 2011.
"However, for the first half of the year overall production levels actually increased by 2.7 per cent, with increased production evident in areas of poultry meat, table eggs, mutton and beef while pork declined. As a result, there is a now a higher expectation of the eventual annual output and the original growth projection being revised upwards to 0.6 per cent. Guyana’s short term economic risk rating is 30.6," it said.
The compendium highlighted this country's favourable business environment, which it said is attracting more and more foreign investors.
With headwinds to global growth building, BMI said it has assessed which economies in Latin America and the Caribbean are most at risk from reduced capital inflows and lower trade volumes. While the impact on growth could be severe, most regional economies still have enough ammunition to avoid complete collapse.
"The external outlook for Latin America and the Caribbean has turned bleaker over the past month, with the threat of a double-dip recession in the US and a Eurozone fiscal crisis weighing heavily on investor sentiment. Since the impact on Asia of another EU and US recession would be severe, we believe that the threat to growth in the Latin American and Caribbean Region is, perhaps, even more serious than it was during the Fiscal Year 2008/09 global financial crisis, on account of its importance," BMI argued.
It said a global slowdown would likely impact on regional growth through two main channels, capital flows – both portfolio and foreign direct investment (FDI) – and trade.

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