Latest update April 23rd, 2024 12:59 AM
Aug 09, 2017 Editorial
The 2017 mid-year economic report is something of a mixed bag, in the sense that while revenue has increased by 13 percent or $97 billion, and production in some sectors has increased, the decline in others would be cause for concern.
The increase in earnings has been fueled largely by the lowering of VAT, the broadening of its coverage, and entry into new sources such as the oil and gas industry.
According to the 2017 Mid-Year Report, the country’s real gross domestic product (GDP) rose to 2.2 percent in the first half of 2017, compared to 2.0 percent for the same period last year.
This marginal increase was mainly due to the expansion of the agriculture, fishing, and forestry sectors, with the manufacturing, services and construction sectors also making significant contributions.
The manufacturing sector in particular grew by 9.9 percent in the first half of 2017, following a decline of 14.1 percent in the corresponding period in 2016. The overall growth in the economy in 2017 was led by the expansion in the rice and fishing industries.
Indeed, it was a ballooning year for the rice industry whose growth increased by a whopping 31.6 percent over production in the first half of 2016. This was due mainly to favourable prices on the world market, strong demand, and entry into new markets, such as Mexico and Cuba.
In addition to seeking new markets, the Guyana Rice Development Board (GRDB) has promoted value-added products in the industry such as a wheat-rice blend of flour.
The overall growth performance of various sectors, especially rice, in conjunction with the decline in several other sectors, particularly the continued contraction of sugar production, could possibly spell trouble, especially for those at the lower end of the economic ladder. The problem is simple: the government spends more than it earns and the country imports more than it exports, resulting in huge deficits.
However, the Minister of Finance has assured the nation that despite the relatively weak performance in the first half of 2017, production in the second half is expected to be on target. He told the nation that circumstances beyond his control have left him with no choice but to revise the 2017 GDP growth rate from the 3.8 percent projected at the time of the budget last December to 3.1 percent for fiscal year ending December 2017.
It should be noted that almost every initiative the authorities have tried in the past year to boost the economy has sputtered and the reality is that a .02 percent growth rate is infinitesimal. Sound policies are needed for the growth rate to reach the 3.1 percent benchmark rate by the end of the year.
With such a marginal increase in GDP growth, the government should move quickly to diversify the economy. This should be the number one priority. It should include the pursuit of an export and investment promotion strategy to boost the manufacturing sector and wean the nation from the importation of food and other basic commodities.
It must be led by the private sector, which is the economic engine of growth for the country. The government would also be well advised to establish a Council of Economic Advisers to aid in the stimulation of growth in all the various sectors.
The truth is the economy is limping at an anemic two percent growth rate due to the lack of foreign investment, which means that the economy has been starved of capital. Small businesses are the backbone of the economy, but if they are strung up by mindless regulations they cannot contribute to growth.
Without robust growth in small enterprises the economy cannot take off. These are worrying trends and the challenges facing the administration may well be too difficult to overcome unless proper advice is sought.
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