…sugar contracted by 55.9% compared to last year
After recording a 36.4% growth in the real gross domestic product (GDP) for the first half of 2022, the Ministry of Finance has now revised the projected GDP growth upwards from 47.5% to 56%, according to the mid-year financial report.
The report was released last evening and said that the non-oil economy grew by 8.3% in the first half of the year which caused it to be revised to 9.6%.
In his 2022 budget speech, in late January, Senior Minister of Finance in the Office of the President Ashni Singh had projected the non-oil economy to grow at 7.7% in 2022. He had said that rebounds in rice growing, gold mining, construction and retail trade were expected to fuel that projection.
In the mid-year report, it was explained that the registered 36.4% growth in GDP was mainly driven by petroleum, other crops and the services sector. It added that the effects of the 2021 floods continued to limit the performance in some sectors during the first half of the year.
The agriculture, forestry and fishing sector is estimated to have expanded by 10.9% in the first half of the year, driven by higher output from the other crops, forestry and livestock industries, the report said. However, the growth in those subsectors outweighed the somewhat weaker performances in sugar and rice growing, and fisheries.
The report said that despite government pumping billions of dollars into the Guyana Sugar Corporation (GuySuCo), the sugar industry contracted by 55.9% in the first half when compared to the same period in 2021. GuySuCo produced 13,089 tonnes of sugar in their first crop of 2022 and the poor performance is attributed to the continued fallout from the 2021 floods, erratic weather conditions, mechanical issues and labour challenges faced by the producing estates. Government said that based on the performance in the first half of 2022, the industry is now expected to contract by 29.5% this year. Since taking office in August 2020, the PPP/C government has injected over $17 billion into GuySuCo after campaigning heavily on resuscitating the sugar industry following the closure of several estates by the APNU+AFC government. Despite the constant injection of finances into the operations of the sugar corporation, there continue to be serious issues.
In the 2022 budget, GuySuCo received $6 billion to support its operations and in August this year that amount was bolstered by an addition $3.4 billion which was approved in a supplementary budget.
In his budget 2022 speech, Singh said that the sugar sector was expected to grow by 11.8% and GuySuCo will begin to recover from the onslaught of the 2021 floods, with the aim of producing almost 65,000 tonnes of sugar.
Similarly, the rice industry was projected to grow by 25.1% in 2022 which meant that the 20.5% decline the previous year would have been reversed. However, the 2022 mid-year report related that rice industry contracted by 22.4% with a total production of 290,780 tonnes of rice. Government said that the contraction is as a result of the prolonged impacts of the 2021 floods and as such it has revised the projected growth of the industry to 7.8%.
The other crops subsector is estimated to have expanded significantly by 27.7% in the first half of the year with the growth being attributed to increased production across all crop categories with reported increases in cultivation. The projected growth for this sector has now been revised to 17.9% from the previously anticipated growth of 13.6%.
The livestock industry is estimated to have grown by 4.2% when compared with the first half of 2021. The production of poultry meat, beef, pork and mutton grew by 9.2%, 6.9%, 18.2% and 28%, respectively. On the downside, the production of eggs and milk fell by 37.4% and 18.2%, respectively.
Poultry meat
Government said that the increased poultry meat production can be attributed to increased production of black giant chicks and the importation of black giant hatching eggs. The production of eggs was severely hampered by the increased incidence of bird flu in the US. Farms were unable to restock, resulting in lower hatchability.
The subsector is now projected to grow by 5.1% this year.
Where it comes to fishing, the sector was projected to grow by 5.8% but the mid-year report stated that the industry has in fact contracted by 19% during the first half of 2022. Fish and shrimp production fell by 11.8% and 26.4 %, respectively. The fishing industry is now expected to contract by 29.8% in 2022.
The projected 13.5% growth rate for the forestry sector remains the same with a 47.1% increase recorded for the first half. At the end of June, 203,220 cubic metres of timber products were produced, compared with 137,040 cubic metres at the end of June last year, driven by higher-than-anticipated production of logs. Log production is up 59.8% when compared with the position at the end of the first six months of 2021, following a substantive increase in production from large concessions.
Also, the local demand for primary lumber has also increased year-on-year, driven by ramped up construction activity countrywide. However, log production is expected to slow down for the remainder of the year since concessionaires’ quotas are used up, thus maintaining the projected growth rate of the industry.
Guyana’s manufacturing sector contracted by 11.4% and growth is expected to be limited to 7.5%.
The services sector expanded by 7.5% owing to wholesale and retail trade, transport and storage industries. Increased wholesale and retail trade activity was largely driven by the expansion in the construction industry and the corresponding growth in demand for building materials. Growth in the transport and storage sector was mainly attributed to increased demand for haulage and warehousing for the oil and gas sector. Services are now expected to grow by 6.3% this year.
The construction sector is now anticipated to grow by 19% in 2022 after increasing by 20.4% in the first half of the year. The previously projected growth rate was capped at 10.5%.
Extractive industries
Guyana’s extractive industries have been the largest contributor to its GDP growth and that has been recorded for the first half of the year. The mining and quarrying sector is estimated to have expanded by 64.6%, as a result of increased output from the petroleum, bauxite and other mining industries.
With ramped up production offshore Guyana in the Stabroek Block, the oil and gas subsector expanded by 73.5% when compared with the first half of 2021. In the first half of the year, 34.6 million barrels of oil were produced, compared with 20.2 million barrels during the same period last year. Given the outturn in the first half of the year, total production is expected to reach 93.6 million barrels by year-end, and with elevated prices supporting the sector, annual growth for 2022 is now targeted at 113%. The previously projected growth was pegged at 96.7%.
The bauxite industry is estimated to have expanded by 31.9% in the first half of the year. At the end of June, production stood at 343,922 tonnes, compared with 291,560 tonnes in the first half of last year. Production is expected to continue to surpass 2021 levels in the second half of the year and as such, the projected growth rate for the industry has been upgraded from 25.4% to 37.5% for 2022.
However, the gold industry has declined by 1.5% owing to lower declarations. According to the report, declarations totalled 236,728 ounces at the end of June, compared with 240,318 ounces last year. The small and medium scale operators output fell 6.5%, to 188,956 ounces. This resulted mainly from lower declarations from dealerships, which declined by 9.9% year-on-year.
Nevertheless, declarations from the single producing foreign operator exceeded last year’s half-year output by 111.1% to reach 47,772 ounces. The project growth for the sector is now estimated at 7.4%.
The other mining and quarrying industries are estimated to have expanded by 36.3%.
While quarry stone output is estimated to have fallen by 4%, sand output, based on surveys, is estimated to have expanded by 19.8% owing to increased demands from the construction industry. Stone output was affected largely by two factors, inclement weather in the second quarter, and stone imports increasing year-on-year at a lower value.
Meanwhile, diamond declarations also recorded significant improvement over last year, increasing from 18,432 metric carats in the first half of 2021, to 49,016 metric carats this year. Also boosting growth in the other mining sector is the production of manganese for the first time in decades. At the end of the first half, 193,665 tonnes of manganese were produced, with a total of 378,000 tonnes expected by year-end. The other mining and quarrying industries is now projected to grow by 11% this year.
Inflation and prices
The Finance Minister had projected Guyana’s inflation rate to be 4.1% for 2022 but that figure has been revised upwards to 5.6% according to the mid-year report. The report explained that the consumer price index, at the end of 2022, increased by 4.9% when compared to the same period last year.
The revised inflation rate is largely as a result of high food and energy prices, with the former increasing by 8.1% and contributing 3.6% points to the inflation rate.
“The main drivers within the food category of the CPI basket were meat, fish and eggs, vegetables and vegetable products, and cereals and cereal products, which accounted for 1.5 percentage points, and 0.6 of a percentage point for each of the latter two, respectively. Regarding the elevated energy cost, the major contributors were operation and personal transport rising by 27.1 % and contributing 0.6 of a percentage point as well as fuel and power rising by 9% and accounting for 0.4 of a percentage point,” the report identified.
It added that the revision of the inflation rate is on par with that of 2021. To counter the cost of living, the government had increased a series of relief measures. During the Budget 2022 presentation, one of the key measures announced was the reduction of excise tax on petroleum from 20% to 1%. In March, Government cut this tax further from 10% to zero. Additionally, Government removed VAT on cement to lower the cost of construction, and announced the reduction of the final tax applied on miners’ incomes from 3.5% to 2.5%, and the removal of the 10% tributors tax.
Moreover, as part of the $5 billion allocated in Budget 2022 for measures to ease the cost of living, Government utilised $1 billion for the purchase and distribution of fertiliser to farmers across the country and $800 million for cash grants to households in riverain and hinterland communities.
Finances
The overall balance of payments recorded a deficit of US$100 million at the end of the first half of the year. At the end of June, the current account balance improved from a deficit of US$259 million to a surplus of US$780.4 million on account of a significant improvement in export earnings.
The report said that the merchandise trade balance improved upon its surplus in the first half of 2021 by US$1,823.6 million, growing to US$2,616.3 million at the end of June. This substantial increase is a reflection of growth in export earnings in the first half of 2022. Notably, total export earnings more than doubled over the review period, growing by US$2,330.2 million to US$4,352.3 million, and outweighed the 41.2% growth in import payments. This is largely attributed to a robust performance from the oil and gas sector, as well as a marginal increase in non-oil exports.
Export earnings from the crude oil amounted to US$3,612.3 million at the end of the first half of the year, compared with US$1,296.6 million over the same period last year.
Non-oil export earnings increased by 2% amid improvements from the ‘others’, bauxite and timber categories, which grew by US$31.3 million, US$7.2 million, and US$3.1 million, respectively. Within the ‘others’ category, notable outturns were recorded for commodities such as shrimp and prawns, diamonds, and fish and by-products. Timber exports grew amid an increase in the volume of logs and sawn wood, and bauxite exports were supported by greater performance from both operators within the sector. These improvements offset reductions in earnings received from rice, sugar, and gold exports, which fell year-on-year by US$19.5 million, US$4.1 million, and US$3.5 million, respectively.
Total import payments grew significantly over the review period to reach US$1,736 million, increasing by 41.2%. This is largely owed to rising oil prices globally, which resulted in the import cost of fuel and lubricants increasing by 62.9% over the level at the end of the first half of 2021, to a total of US$593 million this year. The overall increase in import payments was also attributed to significant growth in payments for capital goods, which expanded primarily on account of mining machinery imports rising by US$184.8 million to US$244.5 million at the end of June.
The capital account moved from a surplus of US$158.6 million in the first half of 2021, to a deficit of US$897.6 million at the end of June 2022, primarily due to larger cost recovery associated with higher prices and production, the report starts.
The non-financial public sector expanded on its deficit by 31.6% to US$149.7 million. Captured within this category are transfers to the Natural Resource Fund (NRF), which increased by US$198.3 million, to US$344.2 million this first-half. Notably, the first withdrawal from the Fund was also recorded in the first half of the year at US$200 million.
Net foreign direct investment, over the review period, declined from a surplus of US$359.8 million to a deficit of US$751.7 million amid larger cost recovery in the oil and gas sector, again associated with higher prices and production.
The overall balance of payments deficit was financed by a drawdown on the Bank of Guyana foreign reserves, which stood at US$710.9 million at the end of June, equivalent to 1.2 months of import cover.
NRF
During the period January to June 2022, Government had five lifts of profit oil from the two producing FPSOs, Liza Destiny (3) and Liza Unity (2). In the first half of the year, Government received US$307 million as revenue from their share of profit oil and US$37.1 million in royalties. The cumulative balance, inclusive of interest income, at the end of June was US$753.3 million, after a withdrawal of US$200 million in the month of May.
At the beginning of the year, it was anticipated that Government would have 13 lifts of profit oil from the Stabroek Block. This is unchanged. However, with the price of crude oil ballooning after the Russian invasion of Ukraine, NRF deposits are now projected to be 32.5% higher than the US$957.6 million projected at the time of preparing Budget 2022.
Government is now projected to earn US$1.1 billion as revenue from the sale of its share of profit oil, and US$147.7 million in royalties in 2022, subject to the evolution of world market prices.
Fiscal Sector
The report highlights that at the end of the first half of 2022, the non-financial public sector recorded a surplus of $10.4 billion, in comparison with the $13 billion deficit for the corresponding period in 2021. This was due to higher revenue from the Central Government which resulted from higher tax collections, and a lower deficit for the public enterprises, along with the first-time withdrawal from the NRF.
At the end of 2022, the overall balance for the non-financial public sector is expected to reach a deficit of $132.1 billion, equivalent to 9.9% of GDP.
The overall balance for Central Government (after grants) for the first half of 2022 reported a surplus of $13.8 billion, compared with a deficit of $9.5 billion for the same period in 2021. This improvement was largely driven by the first withdrawal from the NRF of $41.7 billion, an increase of $16.2 billion in non-oil current revenue and an increase of $3 billion from grants. These surpassed the growth in current and capital expenditures of $22.5 billion and $15.3 billion, respectively. Central Government overall balance after grants is now anticipated to record a deficit of $115 billion by end-December 2022 or 8.7% of GDP.
In the first half of 2022, Central Government current revenue collections, net of the Guyana REDD+ Investment Fund (GRIF) and the NRF withdrawal, totalled $151.3 billion. Internal revenue collections amounted to $88.6 billion. Growth in this category was mainly on account of higher collections of corporation tax from private companies within the oil and gas sector, financial institutions, retail sale, beverages, and telecommunications sector.
Additionally, both withholding and personal income tax collections increased mainly on account of the oil and gas sector. The withholding tax collections were $22.8 billion, while personal income taxes collections amounted to $26.8 billion.
Customs and trade collections increased by $1.1 billion to $13.4 billion. The higher collections were primarily attributed to an increase of import duties of $807.6 million and environmental levy of $154.3 million, consistent with higher level of imports reflected in the balance of payments.
Value-added tax (VAT) and excise tax collections declined by $6.9 billion to $43.2 billion, when compared with the same period in 2021. This is attributed to the slew of relief measures catered for in Budget 2022.
Excise tax collections declined by $7.8 billion to $15 billion during the first half of 2022.
Expenditure
The report stated that non-interest recurrent expenditure amounted to $133.4 billion, which increased by $22.5 billion, or 20.3% when compared with outlays in the first half of 2021. This is the result of higher expenditure across all three categories – personal emoluments, other goods and services and transfer payments. Personal emoluments reached $38.4 billion, up by $2.4 billion or 6.6%, from the same period in 2021, on account of the 7% full-year retroactive salary increase which was granted in December 2021.
In the category of other goods and services, outlays increased by 38.2% to $38.4 billion, and transfer payments by $9.5 billion to $56.6 billion in the first half of the year, both on account of support measures to cushion the impact of cost-of-living pressures.
Total non-interest current expenditure is now anticipated to reach $308.4 billion, up from the budgeted $302.2 billion, reflecting additional expenditure requirements, which include $2 billion for the 2022 Population and Housing Census, and $1.3 billion for expanded drainage and irrigation works.
$46.8 billion was expended under the PSIP, 48.5% higher when compared to the same period in 2021. This was due to the mobilisation advances for two catalytic developmental projects: the Linden to Mabura Road and the East Bank-East Coast Road Linkage projects. Also, the advancement of key initiatives financed on the domestic portfolio saw $37.8 billion injected into the local economy, $10.6 billion more than the same period in 2021.
The overall performance of the Public Enterprises at the end of the first half of 2022 recorded a deficit of $3.4 billion compared with a deficit of $3.6 billion during the same period in 2021. Total receipts were $82.8 billion, an increase of $14.2 billion or 20.7% above 2021, of which the Guyana Oil Company (GUYOIL) accounted for $9.2 billion.
Operating expenses were $84.3 billion, $18.5 billion or 28.1% above the same period in 2021. Public enterprises anticipate ending the year with a cash deficit of $17.2 billion, associated with significant increases in fuel prices for Guyana Power and Light Inc., and lower production by GuySuCo.
Debt Management
Guyana’s total stock of public and publicly guaranteed (PPG) debt amounted to US$3,248.8 million at the end of June 2022, of which total public debt comprised US$3,246.4 million, with total publicly guaranteed debt comprising the remaining US$2.4 million. Total PPG debt rose by 3.9% when compared with the end-December 2021 figure of US$3,126.7 million. This increase was driven by growth in the domestic PPG debt stock, which more than offset a decline in external PPG debt.
The end-2022 total PPG debt stock is projected at US$3,520.5 million, an 8.4% increase relative to the mid-2022 position, driven by anticipated expansions in both domestic and external debt.
External PPG debt contracted by 1.6% from US$1,392.8 million at the end of last year, to US$1,370.8 million at end-June 2022. This reduction stemmed mainly from negative net flows from the EximBank of China, coupled with depreciation of the Renminbi Yuan against the US dollar.
At mid-year 2022, multilateral creditors held 66.6% of the external PPG debt portfolio, with bilateral creditors holding 31.1%. The remaining 2.3% was held by private creditors.
External PPG debt is projected to increase by 10.7% from its mid-2022 position, to US$1,518 million at end of 2022, on account of anticipated positive net flows from both multilateral and bilateral creditors.
Government said that at the end of June, domestic PPG debt totalled US$1,878 million, up 8.3% from the end-2021 figure of US$1,733.9 million. This increase was driven by a 21.8% expansion in the stock of treasury bills to US$856 million, reflecting the issuance of new fiscal instruments in the first half of 2022.
The end-2022 domestic PPG debt stock is projected at US$2,002.6 million, 6.6% above its mid-2022 position, due to anticipated further issuances of new fiscal treasury bills.
Total PPG debt service payments amounted to approximately US$56 million in the first half of 2022, 2.4% higher than in the first half of 2021. This increase was fueled by external debt service payments, which grew by 4.4%, from US$41.2 million in the first half of 2021 to US$43 million in the first half of 2022.
Conversely, domestic debt service payments contracted by 3.7% to US$13 million in the first half of 2022, when compared to the first half of last year. The determining factor behind this contraction was a 5.4% decline in domestic principal repayments, from US$9.7 million to US$9.2 million.