Jun 18, 2019 News
The country’s economic growth strengthened in 2018 with broad-based expansion across all major sectors.
According to the staff of the International Monetary Fund (IMF) who were here to conduct routine consultations, real gross domestic product (GDP) grew by 4.1 percent in 2018, up from 2.1 percent in 2017, led by construction and services sectors.
Inflation remained steady at 1.6 percent at the end of 2018, on the back of stable food prices and exchange rate.
For 2019, the mission projects real economic growth of 4.4 percent, driven by continued strength in the construction and services sectors ahead of oil production in 2020, and strong recovery in mining.
“The authorities do not foresee any significant spillovers from the crisis in Venezuela at present. However, the influx of migrants into the hinterland and rural areas could put socio-economic pressures on the local communities,” according to a statement from IMF yesterday.
The ‘Concluding Statement’ describes the preliminary findings of IMF staff at the end of an official staff visit, or mission, in most cases to a member country.
IMF explained that missions are undertaken as part of regular, usually annual, consultations under Article IV of the IMF’s Articles of Agreement, in the context of a request to borrow from the fund, as part of discussions of staff monitored programmes, or as part of other staff monitoring of economic developments.
However, IMF advised that the views expressed in the statement are those of its staff and do not necessarily represent the views of the IMF` Executive Board.
“Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.”
A staff team, led by Arnold McIntyre, visited Georgetown during June 3 to June 14 to hold discussions for the 2019 Article IV Consultation.
The team met with Prime Minister, Moses Nagamootoo; Finance Minister Winston Jordan; Minister of Legal Affairs and Attorney General, Basil Williams; Central Bank Governor, Dr. Gobind Ganga, other senior officials, representatives from the private sector, banks, the opposition party, labour unions, and other stakeholders.
According to the IMF staff, the mission supports continued efforts by the authorities to strengthen institutional, governance and management practices, which will also help reduce vulnerability to corruption.
“It commends the ongoing efforts in modernizing the revenue administration and strengthening the public investment management system. At the same time, the mission reiterates the importance of addressing the weaknesses identified in the 2017 Public Investment Management Assessment.
Greater urgency is attached to these reforms ahead of the expected increase in public spending as oil production begins.”
The mission said it notes authorities’ intent to move to rigorous project selection and prioritization criteria within the context of the new long-term Green State Development Strategy. “The authorities are committed to considering mechanisms to further improve fiscal transparency including, relating to the management of natural resources.”
The mission said it also supports the authorities’ efforts in implementing 2016 Financial Sector Assessment Program (FSAP) recommendations.
“Credit to the private sector grew by 4.0 percent in 2018, faster than 2.1 percent in 2017. The banking sector non-performing loans (NPLs) to total loans ratio have fallen slightly to 11.9 percent as of end- December 2018, from 12.2 percent a year before, but remained high.”
The IMF staff recommended an Asset Quality Review to examine banks’ credit risks and enhance financial sector stability.
“Four bills were approved by Parliament in 2018, covering deposit insurance, emergency liquidity assistance, bank resolution, and national payment system. The transition to Basel II regime (with some elements of Basel III) is on track for completion by end-2019. Staff encourages the authorities to implement the remaining FSAP recommendations, including eliminating reduced provisioning requirements for “well-secured” portions of NPLs and raising the minimum capital adequacy requirement to 12 percent.”
The IMF staff also said that commendable progress has been made in strengthening the framework for anti-money laundering and counter terrorism financing, based on the 2017 national risk assessment.
“Guyana was officially removed from the European Commission’s Money-Laundering Blacklist in February 2019 and is scheduled to undertake a mutual evaluation by the Caribbean Financial Action Task Force in 2022.
“The Financial Intelligence Unit (FIU) has been actively examining cases relating to suspicious transactions, money laundering, terrorist financing and criminal proceeds including those of PEPs, and is working towards greater collaboration with other global FIUs.”
According to the statement from the IMF staff, weaker export performance and higher imports driven by high value imports related to oil production contributed to a weaker current account balance.
“In 2018, the current account deficit rose to 17.5 percent of GDP, from 6.8 percent in 2017. The deficit was largely financed by FDI related to the petroleum sector. Reserves stood at US$528 million in December 2018.”
Meanwhile, the mission found that public finances improved in 2018.
“The central government’s deficit was 3.5 percent of GDP, lower than the budgeted 5.4 percent of GDP. The better-than-expected outturn was largely supported by stronger revenues arising from the pick-up in economic activity, as well as continued improvements in tax administration and the tax amnesty programme which relaxed interest and penalties on payments of outstanding taxes.”
In addition, the IMF statement said, expenditure grew at a weaker pace due to slower capital spending as a result of capacity issues in both the public and private sector.
“In 2019, the fiscal stance is projected to be appropriately expansionary, at five percent of GDP, driven by significant need for infrastructure development and capacity building ahead of oil production.”
The IMF Executive Board is expected to discuss Guyana’s Article IV consultation in August 2019.
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