Gold lifted an otherwise dismal half-year performance by the economy, resulting in 2 percent economic growth for the first part of the year as El Nino hit the sugar and rice sectors hard and wholesale and retail trade plunged.
“The positive growth performances in the mining sector and some services subsectors served to partially offset the below par performances of the agriculture, construction, and wholesale and retail sectors. As a result the overall growth projection for 2016 has been revised downwards to 4.0 percent, from 4.4 percent projected in Budget 2016,” the Ministry of Finance says in its Mid-Year Report which was laid in the National Assembly on Monday.
The report showed that despite the growth in gold production, the agriculture, fishing and forestry sectors contracted by 10 percent with sugar and rice production plunging. “The performance of the economy in the first half was buoyed by growth in the mining sector, particularly as a result of increased production of gold, as well as growth in some of the services sector. Growth in the services sector was boosted significantly from spending on the Jubilee celebrations,” the report says.
For the first half of 2016, economic growth reached 2 percent, which is above the 0.9 percent revised growth rate achieved during the same period in 2015. Non-sugar growth rate increased from 1 percent in the first half of 2015 to 3.1 percent during the same period in 2016.
The report revealed that the mining and quarrying sector grew by 65.7 percent during the first half of 2016, buoyed by significant growth in the gold industry and improved performance from the bauxite industry.
Production in the gold industry reached 322,493 ounces during the first half of 2016, an increase of 94.3 percent over the same period in 2015. “Improved oversight of the industry and granting of concessions to the sector were among factors that contributed to an increase in output. Production levels for small and medium sized miners rose by 26.2 percent in the first half of 2016 compared to the same period in 2015,” the report said.
According to the figures provided, gold exports more than doubled compared with the first half of last year, rising from US$188.3 million to US$390.7 million.
“The improved international price for gold, combined with the two new gold companies reaching full capacity, is expected to play a major role in enhanced production levels in the second half of 2016. Overall gold production for 2016 is expected to be at an all-time high, rising from the budgeted 450,873 ounces to a projected 650,000 ounces,” the report says.
Creditably
Meantime, the report said that the bauxite industry performed creditably with production increasing by 2.9 percent in the first half of 2016 to 760,689 tonnes, compared with 746, 824 tonnes achieved during the same period last year. In 2015, Bauxite Company of Guyana Inc (BCGI) closed mining operations in Kwakwani as a cost-saving measure, and shifted assets to its new Kurubuka 22 mine which was commissioned in 2015.
“The industry was able to increase production, despite receiving a lower average price for exports in the first half of 2016 compared with the first half of 2015. The international price of aluminum, in June 2016, remained below its June 2015 level, despite improving over the first half of this year. As a result of the better-than-expected performance, and recovering prices, production for bauxite for 2016 has been revised upwards to 1,680,747 tonnes from the budgeted 1,526,467 tonnes,” the report said.
Despite the increased production, bauxite exports fell from US$53.3 million to US$46.3 million, a decrease of about 13.1 percent. The report noted that although global prices for aluminum increased over the first six months of 2016, they remained below 2015 levels. The average price for bauxite exported from Guyana was US$61.7 per metric tonne over the first half of 2016, down from US$76.8 per metric tonne in the first half of 2015. As a result, although the quantity of bauxite exported increased, the total value of bauxite exports was lower in the first half of 2016 than for the same period in 2015, the report said.
The other-mining and quarrying sector grew significantly during the first half of 2016 by 13.9 percent, mainly driven by a 16.7 percent growth in the diamond industry. Although the growth in the diamond industry was strong, it was weaker than the growth rate of 97.9 percent a year ago when there was some inter-industry shifting from gold to diamond, mainly due to low gold prices in 2015.
The report said that diamond exports fell by 10.7 percent, from US$9 million to US$8.2 million for the first half of the year. It was noted that the average price per carat received for Guyana’s diamond exports has fallen, resulting in a lower value of diamond exports, despite higher export volume.
Growth in other subcategories of the sector including sand and stone was less than diamonds.
Manufacturing
Meantime, the report indicated that the manufacturing sector contracted by 14.1 percent during the first half of 2016, which it said was largely as a result of the decline in output of rice and sugar. There were some bright spots in the sector, however, as production increased for products such as rum, stockfeed, and pasta. Other manufacturing declined by 3 percent as a result of reduced production of pharmaceuticals and aerated beverages. In the case of the latter, several reports indicate, a major manufacturer is facing reduced market share from higher imports of legal and smuggled beverage products, the report said.
It also revealed that some of the smaller industries within the services sector performed creditably during the first half of 2016. The financial and insurance industries grew by 5.9 percent and the electricity and water industries expanded by 8.1 percent.
The report attributed growth in the other services category to the Jubilee celebrations. It said that there was an increase of 102 percent in visitor arrivals during May 2016 compared to May 2015, which translated to 24,987 visitor arrivals in May 2016, the highest number of monthly arrivals since July 2014.
“It is estimated that the spending stimulated over the Jubilee period by the additional visitors resulted in increased activity in the hospitality sector including hotels, restaurants, and craft markets, to name a few,” it said.
However, wholesale and retail trade, and construction, which account for approximately a third of the sector, contracted by 11.3 percent and 7.5 percent, respectively. The increased pace of implementation of the Public Sector Investment Programme (PSIP) in the second half of 2016, is projected to drive increased construction activities, and contribute to the expansion of the services sector, the report said.
Meantime, the Ministry reported that the overall balance of payments improved to a surplus of US$12.1 million for the first half of 2016, from a deficit of US$58.1 million in the first half of 2015.
The report also revealed that remittances declined from US$123.50 million in the first half of 2015 to US$95.7 million in the first half of this year. “Lower remittances may be a factor in the weaker performance in some real sector industries, such as wholesale and retail trade, as households have less cash to spend on consumption and investments,” the report said.
Foreign direct investment inflows also fell, from US$78.3 million in the first half of 2015 to US$29.2 million in the first half of 2016. Foreign direct investment inflows in the first half of 2015 were buoyed by substantial investments in the gold sector, the report noted.
Official reserves held by the Bank of Guyana remained stable during the first half of 2016, and near the reserve levels of the same time period in 2015. At the end of the first half of 2016, foreign official reserves totalled US$634.6 million, up slightly from US$626.9 million at the end of the first half of 2015, the report revealed.
According to the Ministry, while much has been achieved, after reviewing all sector performances and the global outlook, a conservative position for the revised economic outlook was adopted, projecting a slightly lower growth rate for 2016 than originally forecasted. “But bright prospects in key areas of construction, other services, fishing, gold and tourism could yet see the original growth rate being realised in this our Jubilee Year,” it said.
“The performance during the first half year of 2016 highlighted the need for significant improvements going forward. Sector performances in terms of growth demonstrated a need for structural fixes in key sectors, capacity gaps to be addressed, data gaps to be filled and the need to improve operational efficiencies. The economy’s vulnerability to a range shocks including global economic volatility and weather phenomena like El Nino demonstrate a need for greater diversification and deliberate policies to secure greater resilience. In particular, going forward, public sector performance must improve in its timeliness and results-based orientation in order to improve both programme and project implementation which will ensure improved service delivery across all sectors,” the report said.
