Guyana’s Gross Domestic Product is projected to grow by 5.5 per cent this year, 6 per cent in 2014 and 3.3 per cent by 2018, according to the International Monetary Fund’s (IMF) World Economic Outlook released in April.
The report noted that the Caribbean’s growth continues to be held back by high debt levels and weak competitiveness.
The 2014 projection puts Guyana third in the region on the list behind Haiti – projected to grow by 6.3 per cent – and Peru – projected to grow by 6.1 per cent – in terms of GDP growth
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According to the report, output growth moderated in Latin America and the Caribbean during 2012. But it said that domestic demand remained strong.
The report said that for the region, growth is projected to increase to 3.5 per cent in 2013, supported by a pickup in external demand, favourable financing conditions, and the impact of earlier policy easing in some countries.
The authors of the report said that policymakers in Latin America need to strengthen fiscal buffers, contain the build-up of financial vulnerabilities, and move forward with growth-enhancing reforms.
“Economic activity in Central America was also resilient, expanding by an average of 4¾ per cent in 2012. However, in much of the Caribbean the recovery remained constrained by high debt levels and weak tourism receipts,” the report said.
According to the report, real GDP growth in the region declined to 3 per cent in 2012, from 4.5 per cent in 2011, “reflecting a slowdown in external demand and, in some cases, the impact of domestic factors.”
Most Central American economies are projected to expand in line with potential (by about 4½ per cent), supported by strengthening in exports and remittances, although fiscal consolidation may dampen demand in some cases, the report said adding that the recovery will continue in much of the Caribbean, with a gradual pickup in tourism flows.
It is projected that the region would be seriously affected by a sharp slowdown in emerging market economies, particularly in China.
And the IMF report warned that large and potentially volatile capital flows will continue to present a challenge for the region. “Policies need to be geared toward limiting the build-up of financial and corporate sector vulnerabilities in an environment of cheap and readily available external financing,” the report said.
While exchange rate flexibility should continue to be used to buffer shocks and discourage speculative capital flows, also critical will be strong prudential regulation and supervision, focused on identifying vulnerabilities and limiting systemic risks, as well as adequate capitalisation and loan loss provisioning in economies that have recently experienced rapid credit growth.
The report advised that to maintain high rates of potential output growth, the region needs to invest more in infrastructure and human capital, improve the business and regulatory environment, and diversify exports. Increasing competitiveness is also critical for the Caribbean, where higher growth would also help alleviate the high debt burden, the report said.
