Economic growth projected at 5.6 per cent in 2014

* Growth in 2014 is projected to be 5.6 per cent (5 per cent in 2013)

* Real GDP expanded by 5.2 per cent in 2013, with the non-sugar GDP growing rapidly by 6.3 per cent, reflecting the underlying strength of the other sectors of the economy. * Overall Balance of Payment is estimated at a deficit of US$21.9M in 2014 (Deficit of US$119.5M in 2013)
* Total current revenue, net of GRIF is targeted to increase by 10.3 per cent to $149.6B
* Total expenditure is projected to increase by 25.4 per cent to $215.9B
* Returns of value added and excise taxes are targeted to increase by 6.7 per cent to $65.8B
* Export earnings contracted marginally by 2.8 per cent to US$1.4B
* Net current transfers decreased by 15.7 per cent to US$353.2M, due to lower receipts of worker remittances
* Gross international reserves of the Bank of Guyana totalled US$776.9M in 2013

THE Guyanese economy has experienced eight consecutive years of growth up to 2013, and is projected to expand by a 5.6 per cent in 2014.

Finance Minister, Dr. Ashni Singh, made the disclosure on Monday in the National Assembly during his 2014 National Budget presentation.
He said: “In the first two years of the current term, self-styled new dispensation notwithstanding, our government has ensured the gains of our previous terms of office were extended on and built upon.
“Over the biennium, the Guyanese economy has continued to grow at an annual average of 5 per cent, at a time when growth in the Caribbean averaged 1.3 per cent.”
Singh maintained that amidst the challenges, including persistently unhelpful external conditions, the task before this People’s Progressive Party/Civic (PPP/C) Government has been to ensure that progress and development are not stymied or slowed in our country.
“(This is) a task to which we have remained resolutely faithful and at which we have still managed to accomplish much,” the minister stressed.

2014 TARGETS
With growth estimated at 5.6 per cent, the non-sugar economy projected to grow by 5.2 percent.
Monetary policy primary objective, according to Singh, continues to be price stability and for the year 2014, an inflation rate of 5 per cent is targeted.
The minister reported that the overall balance of payments is estimated to record an overall deficit of US$21.9M in 2014, compared to a deficit of US$119.5M in 2013.
“This outturn is on account of a higher surplus of US$426.2M on the capital account, compared to US$314.8M in 2013, reflecting an increase in FDI (Foreign Direct Investments) and disbursements,” he said.
Addressing the targets for the non-financial public sector, he stated that, as it relates to Central Government operations, total current revenue, net of the Guyana REDD+ Investment Fund (GRIF) is targeted to increase by 10.3 per cent to $149.6B, with the Guyana Revenue Authority accounting for $135.3B.
Singh said, “This is driven by a projected eight per cent increase in internal revenue collections to $55.8B, due to anticipated strong private sector performance at the company and the self-employed levels.
“The returns of value added and excise taxes are targeted to increase by 6.7 per cent to $65.8B, associated with higher import levels.
“Non-tax revenue collections are projected to increase to $14.4B, reflecting projected higher Bank of Guyana profits.”
He added that the total expenditure is projected to increase by 25.4 per cent to $215.9B, mainly attributed to $31B increase in capital expenditure due to acceleration of key infrastructural projects, including the Cheddi Jagan International Airport (CJIA) modernisation project and the commencement of key targeted environmental enhancement and rural enterprise programmes.
“Non-interest current expenditure is budgeted to increase by 10.6 percent to $128.3 billion. This increase can be primarily attributed to continued investment in our social sectors,” Singh said.
In overall review, the minister explained that the deficit of the Central Government is programmed at 4.9 per cent of Gross Domestic Product (GDP) in 2014, totalling $32.4B.
Singh said, “The overall deficit of the public enterprises is targeted at $2.1B, equivalent to 0.3 per cent of GDP. This outturn is attributed to a 6.8 percent increase in expenditure to $137.9 billion. The overall deficit of the non-financial public sector is programmed at $34.6B or 5.2 per cent of GDP.”

PERFORMANCE
Of note also is the fact that FDI for 2013 totalled US$507.7M, when FDI flows elsewhere were contracting dramatically. Private sector credit has expanded by 34.6 per cent cumulatively, and Guyana’s external debt declined from 46.7 per cent to 41.9 per cent of gross domestic product.
The Finance Minister pointed out that over the same period, Government invested a total of $89.8B in the education and health sectors, and a total of $20.7B on our country’s roads and bridges network.
He said: “We have injected $9.7B into the sugar industry, and spent a further $6.2B subsiding electricity in Linden and Kwakwani.
“We have increased old age pensions from $7,500 to $12,500 monthly, continued to pay water charges for old age pensioners and introduced an annual electricity subsidy of $20,000 for the same target population, increased the income tax threshold from $40,000 to $50,000 monthly, introduced mortgage interest relief for first time home owners, and reduced the personal income tax rate from 33 percent to 30 percent.
“We have recruited over 290 new doctors, trained 6,465 teachers in information and communications technology, and distributed 10,286 new house lots.”

GLOBAL PERFORMANCE
Singh pointed out that the global economy has finally started to display signs of recovery, lifting itself out of the harshest economic crisis in living memory, even if at a somewhat modest pace.
“Significant further policy action and improved policy coherence are still needed if growth and job creation are to be accelerated,” he said.
The world economy grew by 3 per cent in 2013. The more advanced economies grew by 1.3 per cent, with the United States economy leading this performance with growth of 1.9 per cent, while the economies of Japan, United Kingdom, and Canada each grew by 1.7 per cent growth.
In contrast, the economy of the Euro area contracted by 0.4 per cent. Emerging and developing economies grew more rapidly by 4.7 per cent, with China maintaining its long trend of strong growth with 7.7 per cent, while India grew more moderately at 4.4 percent.
In 2014, the global economy is projected to grow by 3.7 per cent, with 2.2 per cent growth projected in advanced economies and 5.1 per cent in emerging and developing economies.
Additionally, in 2014, the outlook for the Caribbean Region is still favourable with growth projected at 2.1 per cent and all Caribbean countries anticipate positive growth.

SECTOR PERFORMANCE
“Government has aimed at creating an environment where the private sector can invest in profitable enterprise, expand production of goods and services, and create jobs.
“These efforts have resulted in a demonstrably more diversified productive base.
“It is this growing level of structural diversification, supported by our Government’s attention to stable macroeconomic fundamentals and prudent public financial management, which has contributed to the economic resilience we have achieved and that has enabled us to withstand testing external and domestic shocks,” Singh said.
In 2013, real GDP expanded by 5.2 per cent, with the non-sugar GDP growing rapidly by 6.3 per cent, reflecting the underlying strength of the other sectors of the economy.
“It is significant to note that the eight years from 2006 to 2013 represents the longest period of uninterrupted real economic growth in independent Guyana,” he said.
While the overall performance of the economy remained strong, the sugar industry continued to struggle. Sugar production contracted by 14.4 per cent in 2013 to 186,770 tonnes, extending further the industry’s underperformance in recent years.
Singh said: “The issues confronting the industry such as labour shortages and disruptions, irregular weather, and managerial capacity constraints, are well known, and a more concerted effort is required to return the industry to a growth trajectory that would be consistent with viability and profitability.”
The rice industry, on the other hand, had another favourable year, with production of 535,439 tonnes in 2013, 26.9 per cent over the previous year’s output and setting a new record for the highest ever annual production in the history of the industry. Ongoing investments in drainage and irrigation, increased acreage, and improved yields, together favour continued annual production of over 500,000 tonnes well into the medium term.
Production of other crops grew by 4.2 per cent, while livestock production increased by 4.3 per cent.
The fisheries industry declined by 6.5 per cent, due to some overfishing, which resulted in a suspension of issuance of further industrial fishing licenses, and a reduction in operational trawler fleet.
The forestry industry grew by 5 per cent with total production of 398,964 cubic metres.
The mining and quarrying industry recorded 8 per cent growth over 2012. The gold industry achieved total declarations of 481,087 ounces, 9.7 per cent above the previous year, and a historic performance. This year’s level of declarations represents the highest level of production in the history of the industry, exceeding production levels even when OMAI gold mines were at their peak. The fortunes of bauxite were somewhat more tempered, with the industry registering an 11 per cent decline in value added production. Diamond declarations increased by 56.9 per cent, while stone production grew by 47.8 per cent, the latter reflecting the strong boom in construction activity across the country.
The manufacturing sector grew by 8 per cent. This reflected growth in the manufacturing component of rice, aided by a 5.4 per cent growth in other manufacturing, but offset partially by the decline in sugar manufacturing.
The service industries continued to record overall positive growth with 5.5 per cent achieved at the end of 2013. This growth was led by the construction sector which recorded 22.6 per cent growth as a result of vibrant expansion in private sector construction buoyed by the national housing drive and by commercial construction, as well as implementation of public sector construction projects.
Information and Communication grew by 5.9 per cent reflecting continued growth in demand with the increased availability of information technology products and services. Wholesale and retail trade declined by 0.9 per cent consistent with reductions in imports of consumption, intermediate, and capital goods.
Electricity and water output grew by 5.6 per cent, transport and storage by 4 per cent, finance and insurance by 11.2 per cent, rental of dwellings by 5.6 per cent, while other services declined by 3 per cent.
Public administration, education, and health grew by 2.5 per cent, 3.5 per cent and 4 per cent respectively, reflecting increasing activity in the social sector.

EXPORTS
Export earnings contracted marginally by 2.8 per cent to US$1.4B, mainly due a sharp decline in gold prices along with lower export volumes of sugar, bauxite and timber.
Export earnings on sugar contracted by 13.6 per cent to US$114.2M, due to an 18.7 per cent decline in export volume to 160,284 tonnes, outweighing the 6.3 per cent increase in prices to US$713 per tonne.
Rice export receipts expanded by 22.2 per cent to US$239.8M mainly attributed to an 18.2 per cent increase in export volume to 394,989 tonnes, combined with a 3.4 per cent increase in average export prices to US$607 per tonne.
Gold exports amounted to US$648.5M, a 9.5 per cent decline compared to 2012. This was due to a sharp decline in average realised prices to US$1,344 per ounce compared to $1,575 in 2012, outweighing the six per cent increase in export volume which amounted to 482,527 ounces.
In addition, bauxite exports contracted to US$134.6M, due to a 24.7 per cent decline in export volume to 1,678,971 tonnes, outweighing the 18.6 per cent increase in export prices to US$80 per tonne.
Timber exports earnings declined by 1.4 percent to US$38.5 million, primarily as a result of lower export volume.
Merchandise imports declined by 7.5 per cent to US$1.8B. Across the categories, capital goods contracted by 9.7 per cent to US$415.2M, non-fuel intermediate goods declined by 3.3 per cent to US$410.1M, fuel and lubricants decreased by 9.9 per cent to US$574.7 M and consumption goods declined by 6.1 per cent to US$437.7M.
Singh also said that net current transfers decreased by 15.7 per cent to US$353.2M, due to lower receipts of worker remittances which declined by US$141.1M to US$328.2N.
Net payment of services amounted to US$307.1M compared to US$204.6M due to a US$107.1M increase in non-factor services mainly due to higher royalties and license fees.
Gross international reserves of the Bank of Guyana amounted to US$776.9 million, equivalent to 3.9 months of import cover at the end 2013.

MONETARY DEVELOPMENTS
The Finance Minister said: “Monetary policy continues to focus on maintaining stable prices while promoting private sector credit.
“Net domestic credit by the banking system is estimated to have expanded by 25.2 per cent to $123.9B in 2013, attributed to an increase in credit to the private and public sectors.
“Credit to the private sector expanded by 14.5 per cent, reflecting growth in all sectors. The manufacturing, construction and engineering, personal and real estate sectors grew by 22 per cent, 18.8 per cent, 17.4 per cent and 16.9 per cent respectively.
“In addition, credit to mining and quarrying also grew by 13.9 per cent, followed by agriculture and rice milling which registered growth of 13.7 and 9.9 per cent respectively.”
According to him, prices remained relatively flat throughout the year aided by Government’s continued financial support to the Guyana Power and Light Inc. (GPL) and other electricity suppliers in order to contain electricity prices, as well as close monitoring of fuel prices and taxes to dampen the pass through of imported price volatility.
In addition, Singh said Guyana’s continued emphasis on food production ensured an adequate supply of food commodities throughout the year and helped moderate prices.
“Altogether, these conditions resulted in consumer price index movement of 0.9 percent in 2013, the lowest rate of inflation in decades,” he said.
During 2013, the weighted average lending rate of the commercial banks increased by 8 basis points to 11.16 per cent. This reflected a marginal increase from 11.08 per cent in 2012 but, notwithstanding this movement, private sector credit continued to expand. The small savings rate declined by 36 basis points to 1.33 per cent while the 91-day Treasury Bill rate remained stable at 1.45 percent.
Transactions on the domestic foreign exchange market contracted by 5.8 per cent to US$6.4B. Key exchange rates remained stable throughout the year and, at the end of the year, the Guyana dollar was being traded against the US Dollar at $206.25 compared to $204.5 a year ago.

DEBT
At the end of 2013, Guyana’s total external debt stock stood at US$1.2B, a reduction of 8.3 per cent from the previous year. This reduction was mainly as a result of Government concluding two additional compensation agreements under the Petrocaribe arrangement which saw US$281.1M of oil debt effectively cancelled, equivalent to the value of rice and paddy exported by Guyana to Venezuela from July 2011 to October 2013.
In addition, Guyana negotiated and concluded a debt relief agreement with Bulgaria which further reduced the debt by US$2.9M.
Total external debt service in 2013 amounted to US$45.9 M or 7.9 per cent more than in 2012, comprising principal repayments of US$31.6M and interest payments of US$14.3M.
At the end of 2013, the total domestic debt stock amounted to $98.8B, an increase of 5.7 per cent over the previous year. This increase was largely due to the monetary operations of the Bank of Guyana.
Noteworthy, the stock of government debentures declined in 2013 by $1B, and ended the year at 20 per cent less than the previous year following the repayment of some debentures that had matured.
Government has also concluded negotiations and signed two agreements that would further reduce Guyana’s outstanding external debt by a total of US$91.3M.
The first was a Debt Relief agreement that would write-off 100 percent of Guyana’s debt owed to the CARICOM Multilateral Clearing Facility (CMCF) totalling US$35.9M. The second was a further debt compensation agreement under the Petrocaribe arrangement that would effectively cancel US$55.4M of the oil debt owed to Venezuela equivalent to the value of rice and paddy shipped from October 2013 to January 2014.
“We will also continue to pursue debt relief from our non-Paris Club bilateral creditors, all with the aim of ensuring that we closely guard the very important achievement of debt sustainability into the medium and long term,” the Finance Minister said.