The Economic Commission for Latin America and the Caribbean (ECLAC) has predicted a 4.6 per cent growth rate for Guyana this year, one per cent less than the 5.6 per cent projected by the country, even as it announced that Latin American and Caribbean countries will grow an average of 2.7 per cent due to limited dynamism of the region’s principal economies.
The regional United Nations organisation released on Tuesday its “Updated Economic Overview of Latin America and the Caribbean 2013”, which reviews information on the key economic variables of 2013 and presents new growth estimates for the region.
During his budget speech, Finance Minister, Dr Ashni Singh had stated that Guyana’s economy is projected to expand by 5.6 per cent in 2014, with the non-sugar economy projected to grow by 5.2 per cent. He told the National Assembly that the inflation rate is pegged at five per cent compared to 0.9 per cent last year, the lowest rate in decades. Real Gross Domestic Product (GDP) grew by 5.2 per cent last year while the non-sugar GDP rose by 6.3 per cent.
In 2013, the country’s economy recorded its eighth consecutive year of growth. “Mr Speaker, it is significant to note that the eight years from 2006 to 2013 represent the longest period of uninterrupted real economic growth in independent Guyana,” Dr Singh told the National Assembly.
Viability and profitability
However, while the economy as a whole continues to show sustainable growth, the sugar industry continues to struggle. According to him, a more concerted effort is needed to return the industry to a growth trajectory that would be consistent with viability and profitability.
Meanwhile, ECLAC says that the 2014 regional growth rate would be slightly higher than 2013’s (2.5 per cent), but lower than the rate forecast in December (3.2 per cent), due to an external context still marked by uncertainty and lower growth than expected for the region’s larger economies, Brazil and Mexico, which will expand by 2.3 per cent and three per cent respectively.
In addition, the economic growth projection was reduced for Argentina (one per cent), a country that took several steps in early 2014 to counter the imbalances of recent years, causing its economy to contract. Likewise, the impact of Venezuela’s complex economic situation will result in a contraction of -0.5 per cent of that nation’s activity.
Nevertheless, highly varied expansion levels are predicted for the region’s countries. According to the Updated Economic Overview, Panama, Bolivia, Peru, Ecuador, Nicaragua and the Dominican Republic will have growth figures equal or higher than five per cent, while a significant number of nations will register expansion of between three per cent and five per cent.
In its report, ECLAC says that activity indicators for developed countries – especially the United States, United Kingdom, Korea, Germany and several others from the eurozone – have shown a recovery. There is caution, however, on the situation in China, one of the region’s main trade partners, which set a minimum growth goal of seven per cent for this year.
Limited demand for commodities
In addition, the demand for commodities is forecast to remain limited, especially mining and food products, which, combined with currency appreciation in developed countries, would cause commodity prices to drop modestly. The decrease would affect the economies that export these products, like those of South America.
ECLAC’s document points out that the United States’ recovery will have a positive impact on the economies of its closest neighbours, especially Mexico and other Central American countries, considering its importance as a trade partner. At the same time, the upturn of developed countries will benefit the Caribbean nations, more specialised in service exports, due to better performance by the tourism sector.
St Kitts and Nevis will grow by 3.1 per cent; the Bahamas, 2.5 per cent; St Vincent and the Grenadines, 2.3 per cent; and Trinidad and Tobago, 2.1 per cent, the same figure projected for the whole group of Caribbean countries. The perspectives for the year show a global scenario with lower liquidity, which entails important challenges in matters of macroeconomic policy and external financing for the Latin American and the Caribbean region, the report expresses.
In terms of inflation, while there are no sharp changes expected, a rise in the regional average is forecast due to the indexing changes in Argentina, the moderate rise in several countries’ prices – despite which, inflation remained between three per cent and six per cent – and the high indicators shown by Venezuela. This regional increase was already observed during the first two months of 2014, when average accumulated regional inflation over 12 months rose to 7.6 per cent compared to 7.3 per cent last December. In this context of modest regional economic growth, there will not be a meaningful recovery of employment levels. ECLAC emphasises this could translate into an increase in unemployment rate – which in 2013 registered a new minimum of 6.2 per cent – only if the drop in labour force participation seen last year is reverted.
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