Dear Editor,
The recently released Preliminary Overview of the Economic Commission of Latin America and the Carib-bean 2022 paints a dismal economic and social portrait of the current situation in the region with warnings of real hardships coming in 2023. The entire region and sub-regions (Central America and the Caribbean) will see a significant decline in economic performance. There is, however, one exception, namely Guyana.
The focus here is to set the record straight since there continues to be daily distortions of economic developments in the press and social media. Moreover, there are still those who praise Burnham’s doomed strategy of economic nationalism in the form of controlling the so-called commanding heights of the economy. Among the key points in ECLAC’s “Preliminary Overview” are the following:-
Economic growth in the region will slow down significantly. The overview emphasizes that “GDP growth is … projected to be significantly slower than in 2022, at an average rate of 1.3% for the region. Moreover, “the region would complete the decade 2014–2023 with average growth of 0.9%, which is below —less than half, in fact— even that of the “lost decade” of the 1980s during the external debt crisis.” The main trading partner of the region, the US, is likely to register less than 1% growth in 2023. Guyana is the only exception to the devastation predicted for 2023. Notably China is likely to have the lowest growth rate in 2022
Inflation will continue to exert pressure on macro-economic fundamentals. Note that quantitative tightening in the US and Eurozone, combined with a stronger US dollar, will affect debt servicing costs, and exert pressures on budgetary maneuvers, especially those aimed at ameliorating the steep cost of living. Readers will not be surprised to learn that “[r]ising global borrowing costs are also increasing the risk of financial stress among some emerging market and developing economies, which over the past decade have accumulated debt at the fastest pace in more than half a century.” In the meantime, Guyana has significantly lowered its debt to GDP ratio.
Job creation in the formal sectors of the economies will decline in a region where the vulnerable informal sector is already overgrown. Readers should know that there are major differences between the formal and informal sectors. The former is characterized by employment stability with steady incomes, scheduled merit review in the private sector and annual pay increases in the public sector, regulated working conditions, established procedures for grievances by employees (in most cases), and inter alia, higher rates of unionization with all the benefits that appertain. By contrast, the informal sector is characterized by all or any combination of the following – contingent work, dirty and dangerous work, little or no worker protection protocols, exploitative wages without any regular benefits such as retirement plans, and worst of all, abuse by employers. Note that “[a]fter rising for six consecutive quarters, real wages began trending downward, with the regional median falling by 0.6% in the second quarter of 2022.
The Preliminary Overview also takes account of global dynamics. It notes that “the slowdown is expected to intensify in 2023, with world GDP growing by only 2.6%. Advanced economies are forecast to grow by 0.6% and emerging and developing economies by 3.7%. “Global financial conditions have tightened, financial volatility has increased in both emerging and advanced economies, equity markets in much of the world have fallen sharply, risk appetite has declined, and capital outflows from emerging markets have intensified.” China’s 2022 growth rate at 3.3%, will be the lowest in the past four decades, and next year will see only minimum improvement at 4.4%. Note that the projected growth in the volume of world trade is a mere 1.0% for 2023.
Amidst this generalized decline in global and regional economic performance, Guyana is not only holding its own, but is also making step-level advances in all direction on the economic front. In the economic growth front we are among the highest, if not the highest in the world. World Bank data show GDP will grow from US$ 8.15B in 2022 to $US 9.51B in 2024, an increase of 16.68%. Our debt to GDP ratio is manageable at 24%, compared to many other Caribbean countries. The corresponding figure for Jamaica for example is over 90%. The US has a shocking 123% debt to GDP ratio and manages to survive on account of seigniorage ‘protection’.
While there are real challenges in staying ahead of inflation, the recent 8% increase for public servants, combined with significant top-up in several key sections of the public service will certainly help smooth out financial hardship. Our aggressive housing drive is also distributing equity in the form of house lots or young professional homes. The New Building Society has a graduated interest-rate schedule for mortgages. You can obtain a mortgage for as low as 3.50%.
Finally, one must pay serious attention to the recommendations of ECLAC. The most consequential of these point to “[i]nvestments related to climate change adaptation and mitigation [which] have particularly high development potential.” The Prelimi-nary Overview also recommends sustainable tourism, “energy transition, e-mobility, the circular economy, the bioeconomy, [and] the health-care” sector. Our near-term and long term (LCDS 2030) are both focused in these areas. The recent Guyana-Hess carbon credit deal for US$ 750 million is proof of this.
Editor, the Guyanese population is constantly bombarded with negative letters to the editor in which you will think we are in the doldrums. I agree more must be done for low-income wage earners and done quickly. I agree also that there are serious inequalities that cannot be left unattended. I do, however, think that there is overwhelming evidence that the economic growth we are experiencing will raise the standard of living. One data point to follow is the size of the informal sector. It is declining rapidly, and this is good for wage earners.
Sincerely,
Dr. Randolph Persaud
