A recent report which proffers a less than upbeat picture of the overall economic climate in Guyana has come in for severe criticism from Finance Minister; Dr. Ashni Singh who says it paints a “misinformed, distorted, warped, and totally inaccurate picture”.
The April 2010 Country Report by the London-based Economist Intelligence Unit (EIU) pointed to an uneasy relationship between the government and the private sector despite a net increase in private investment in the country’s economy last year. It also cited a “not optimistic” outlook on the part of the private sector about the country’s economic prospects in the face of an operating environment “characterized by poor infrastructural facilities, high taxes, rampant crime and corruption – all of which impose additional costs on production.”
The EIU, a specialist publisher, serves as an influential source of political, business, social and economic country analyses for companies establishing and managing businesses across national borders. Last Friday’s Stabroek Business reported that significantly, the EIU Report also challenges the veracity of economic growth figures presented in the country’s 2010 budget, asserting that official figures provided by government on the economic performance of the country last year are “difficult to decipher.”
The report says that while its published figures are based on data from the Bank of Guyana, “we believe that the government’s official estimate of real GDP growth of 2.3 per cent in 2009 significantly overstates economic performance.” Specifically, the report challenges the assertion made in the country’s 2010 budget by Singh that the economy grew by 2.3 per cent last year. “If confirmed, this would make Guyana one of the only countries in the hemisphere to record economic growth last year. The estimates stand in stark contrast to the Economist Intelligence Unit’s estimate of a full year real GDP contraction of 0.9 per cent,” the report says. “According to Mr. Singh the economy grew by 3.8 per cent in the second half of the year after a 1.4 per cent contraction in January-June, resulting in a full-year expansion of 2.3 per cent. However, there is little evidence of what was driving growth during the second half,” it adds.
Hijacked
In a response on Saturday, Singh said the EIU’s coverage on Guyana has been hijacked by partisan domestic political operatives. The Government Information Agency (GINA) reported him as saying that it is most unfortunate that the EIU, a Unit whose publications have come to be expected to be objective and competently prepared, “would allow itself to be misled and misinformed by one or two political aspirants and spokespersons who pose as independent correspondents and commentators.” As a result, the EIU’s recent reports on Guyana paint a misinformed, distorted, warped, and totally inaccurate picture of economic developments in Guyana, GINA said.
Singh called on the EIU to take a closer look at the credibility, integrity, and competence of the correspondents and sources used to generate their coverage on Guyana. Pointing to the EIU’s comments on growth in the Guyanese economy, which questions the growth rate of 2.3 percent reported by Government for 2009 and what was driving the growth achieved, the Minister said that these comments sound “suspiciously familiar” and appear to be a “passive copy-and-paste echo of the whining and griping of a tiny minority of self-appointed and politically motivated analysts who are devoid of any technical basis for most of what they say, and who like to style themselves as independent when they are in fact unabashedly partisan and brazenly hostile to the current administration”.
According to GINA, Singh said that the basis for the 2009 growth estimate reported by Government is set out clearly in sector-specific detail in his budget speech for 2010, and in the central bank annual report for 2009, both of which are publicly available. GINA reported that is public knowledge that sugar production amounted to 233,736 tonnes of sugar in 2009 compared with 226,267 tonnes in 2008, representing growth of 3.3 percent; rice production amounted to 359,789 tonnes in 2009 compared with 329,574 tonnes in 2008, representing 9.2 percent growth; and the gold sector generated total declarations of 299,822 ounces in 2009 compared with 261,424 ounces in 2008, representing growth of 14.7 percent.
Singh pointed out that the sugar, rice, and gold sectors grew by 3.3 percent, 9.2 percent, and 14.7 percent respectively, based on hard numbers compiled and reported by the respective sectors themselves, not by the Ministry of Finance.
“These numbers are sourced from the sectors themselves and can be verified directly with those sectors. The sugar production numbers are sourced from the Guyana Sugar Corporation, the rice production numbers from the Guyana Rice Development Board, the gold production numbers from the Guyana Gold Board,” the Minister was quoted as saying. “It is nothing short of absurd and dishonest to call into question these numbers, and it is an insult to the integrity of the large number of persons involved in the respective sectors in data collection and monitoring activities”, he added.
Domestic credit
He argued that there are other data sources that reconfirm and validate the growth in output being observed citing domestic credit to the private sector which expanded by 5.7 percent from $89.3 billion to $94.4 billion, as compiled and reported by the Bank of Guyana, with increased lending for real estate and household mortgages, agriculture, and services. Throughout the world, it is known that increased lending to the private sector by the banking system, and in particular construction activity such as for housing purposes, fuel significant economic activity and bring rapid growth, GINA reported.
It said that the facts are all publicly known, and charged that a Stabroek Business editorial of last Friday based on the report was an “outrageous and blatant attempt” to mislead Guyanese. “The insinuations made by Stabroek News on the accuracy of the statistics are a shameless assault on the integrity of professionals and functionaries in several agencies throughout our country, including on the private sector,” Singh was quoted as saying.
The Minister singled out a Ram and McRae business outlook survey, said to be used by the EIU, saying that this survey is widely known to be “politically motivated, highly flawed, and designed to distort the facts and present a negative picture of Guyana under the current administration. The survey is not based on any scientific method, cannot withstand any rigorous scrutiny, and in its own introduction, confesses that it is “not designed to produce statistically valid findings”.
According to GINA, the main author of that survey and principal of the firm Ram and McRae is “a self-confessed partisan politician”.
The EIU report says that the official 4.4 per cent 2010 growth forecast is “highly optimistic” and well above its own forecast of an expansion of 2.4 per cent. The government’s forecast is premised on improvements in the performance of sugar and bauxite. It notes, however, that “despite the investment of over US$200 million in the sugar sector, including installation of a new state-of-the-art factory at Skeldon, sugar production failed to rise as rapidly as expected in 2009.”
The EIU is forecasting modest positive growth this year though it says that high unemployment and still depressed levels of remittances will result in continuing low levels of private consumption. The report also projects an increase in sugar production as the operations of the new Skeldon plant improves though it points out that “flooding and other weather-related hazards will remain an ongoing risk to agriculture, mining and other economic sectors.”
