Although the Inter-American Development Bank (IDB) in its most recent report noted that Guyana’s oil reserves are equivalent to over 10,000 barrels of oil per capita, there is still some concern about the non-oil economy.
According to the IDB’s Caribbean Quarterly Bulletin, the COVID-19 pandemic has had various effects on Guyana’s economy. One of those impacts has been contributing to the oil-free Gross Domestic Product (GDP) contraction of 4.9 percent in the first half of 2020.
Agriculture, the largest productive, non-oil sector in the non-oil economy, was contracted by 4.1 percent in the first half of 2020. The IDB expressed optimism, however, that rice production will have expanded by 3 percent at the end of 2020. This, according to the IDB, is helping to alleviate the contraction in agriculture.
“The mining industry, Guyana’s second-largest sector with 14.9 percent of GDP, expanded 343.7 percent in the first semester after oil production began in December 2019. Gold production grew, representing nearly 10 percent of GDP, 2.1 percent. during the first half of the year, buffeted by historically high gold prices, ”said the IDB.
“The service sector, possibly the sector most vulnerable to social exclusion policies, fell by 3.8 per cent in the first half of the year, with wholesale and retail trade down 14.7 per cent, transportation and storage 25 per cent, and accommodation and food services 32.9 percent. The construction sector, which had been growing at relatively high rates before the pandemic, fell by 5.6 per cent, ”the report further explained.
Although the oil and gas related aspects of the economy have disappeared like a rocket, there is concern about the non-oil economy. According to the financial institution, the non-oil economy, which had already contracted in the first half of 2020, is expected to fall between 1.4 and 4.3 percent in the full year.
Nevertheless, the IDB noted that Guyana, by virtue of its oil discoveries relative to population, is one of the richest countries per capita in petroleum reserves. The IDB highlighted that Guyana is estimated to have at least 8 billion barrels of oil in its crude reserves … which, in contrast to Guyana’s relatively small population, works out to 10,250 barrels per person.
“Since 2015, ExxonMobil has made 18 oil discoveries, the latest of them in September 2020. Given Guyana’s population of around 780,000, this suggests that the level of reserves is equivalent to 10,250 barrels per person, making Guyana one of the richest countries in petroleum reserves. per capita in the world. ”
“Despite these relatively large reserves, Guyana faces many obstacles and challenges in preparing itself to manage this impending natural resource windfall and achieve maximum benefits for its people,” he said IDB as well.
Another issue mentioned was debt, as the IDB warns Guyana to be careful about debt management – a crucial issue as Guyana becomes an oil-producing nation. It was pointed out that the Government has two other debt options.
“The Government will have the alternative to use some of the new oil revenues to close budget funding gaps and avoid debt accumulation and / or retirees remaining expensive public debt. However, budgetary funding needs to be monitored, as it can erode savings and return the nation to a position of high debt, ”the IDB explained.
“Guyana’s economy is on the cusp of a historic transition due to recent oil discoveries. In this context, maximizing the benefits of faster growth and increased revenue will depend crucially on the financial sector. “