Guyana — Untold Economic Potential Wrapped in Political Uncertainty

The Dutch were the first to colonize much of Guyana back in the 1600’s, and hopefully enough time has passed to eliminate any traces of ‘Dutch Disease’ (which, in fairness to the Dutch, should be rebranded to the Venezuelan / Nigerian / Trinidadian disease!). According to the IMF’s most recent Staff Report, oil production is expected to commence in Q1 2020, averaging 102K bpd, and rising to an average of 424K bpd in 2025 (based on Liza I & Liza II alone). To put this into context, T&T produced at its peak in 1978, just 228,500 bpd. Guyana’s crude oil reserves are the 5th largest in the world relative to her 2018 GDP, and the 11th largest on a per capita basis, according to the IMF.

The IMF suggests that while oil production will expand overall GDP and exports substantially, oil’s direct impact on the domestic economy will be mostly offset by higher imports of oil extraction equipment and payments to the operators. Not unlike T&T and other commodity producers therefore, the (largely enclave) oil sector will make its impact on the wider real economy and population indirectly, via the Government’s (redistributive) spending of its oil revenue, which is expected to boost non-oil GDP growth by 3.5 percentage points on average (based on a multiplier of 0.53 in the Caribbean).

The IMF forecasts that Guyana’s economy will grow 86% in 2020 as oil production comes online, and average 13.7% growth over the following four years.

Apart from Haiti, Guyana remains the poorest country in the Caribbean on a GDP per capita basis, but this is about to change dramatically in a few short years. But what could this sudden boost mean for the average Guyanese citizen? According to the IMF, Guyana surpasses the Caribbean’s median for access to clean water and improved sanitation, despite its relatively low income levels. However, infant mortality and life expectancy are among the weakest in the region. The World Bank reported that Guyana’s human capital is below the median for the region and for its income group. When adjusted for quality of learning, 12.1 years of schooling is equivalent to only 6.7 years, equating to a learning gap of 5.4 years in Guyana. The IDB reported that Guyana’s performance at the Caribbean Examination Council Examination is below the Caribbean average. Furthermore, despite anecdotal evidence of some recent brain-gain, Guyana still has the world’s seventh-highest rate of emigration according to the IDB, and most emigrants are skilled and/or with university education. And despite many governance and transparency-related reforms, Guyana stands at 93rd out of 180 countries on the Corruption Perceptions Index.

Guyana is arguably on the verge of its first major opportunity to meaningfully transform not just its economy, but the quality of life for all its people. The world is watching to see how Guyana’s leaders balance the often competing demands for spending to secure sustainable socio-economic development, versus short-term, politically expedient purposes.

I will be hosting a live webinar to discuss Guyana’s outlook with the IMF Mission Chief Arnold McIntyre on October 3, 2019 at 10AM. You can register at https://register.gotowebinar.com/register/5290001531613132811 or watch the replay on my YouTube Channel.

Economist and leading advisor on the Caribbean

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