Guyana Chronicle
June 19, 2001

THE Guyana Government is confident that, as in the past, the Guyanese people and economy have the capacity and resilience to rebound quickly from any temporary setback.

"We (Government) believe that the policy measures and programmes that proliferate in the 2001 Budget are sufficient to evidence the turnaround that is projected for 2001," Finance Minister Saisnarine Kowlessar declared when he presented it to Parliament last Friday.

But he acknowledged that last year was "a particularly difficult one for Guyana, when, at the external level, massive increases in the price of oil, declining prices for the main exports and new threats to the survival of long-standing trading arrangements in crucial product markets affected this country's capability to accelerate the pace of development.

He said adverse weather conditions hampered especially sugar and rice production and, if that were not bad enough, investors either delayed or postponed investment in light of the elections that were held in the first quarter of this year, Kowlessar told the National Assembly, adding that those were the factors responsible for the small, negative growth rate.

Reviewing the local economy, he said, despite encouraging performances in a number of the sub-sectors, real Gross Domestic Product (GDP) contracted by 0.8 per cent in 2000.

That rate compares unfavourably with the target of 3 per cent and a similar percentage realised in 1999.

Kowlessar said last year's sugar production of 273,317 tonnes was 15 per cent less than the 321,438 produced in 1999, with all estates falling short of their projections, especially during the second crop.

Sugar suffered from impaired drainage and irrigation and an attack of smut disease in the East Berbice area.

Rice production fell by 20.1 per cent and the output was 291,841 tonnes, as against 365,469 tonnes in 1999, also affected by heavy rains and flooding at sowing time for the first crop.

That situation had an effect on the second crop, when only 112,000 acres were cultivated, down from 190,000 in 1999.

Kowlessar said the performance in other agriculture sub-sectors was mixed, with egg production reaching 30.1 million, a 17.1 per cent increase.

Fresh milk realised a 7.8 per cent rise to 31.4 million litres but poultry declined by 5.3 per cent to 11,769 tonnes.

Fish catch grew by 14.1 per cent through nine per cent more prawns while forestry yielded 16 per cent less or 418,948 cubic metres.

Higher gold, diamonds and bauxite production contributed to the overall GDP rise of 5.9 per cent in the mining and quarrying sectors.

Gold went up by 4.8 per cent to 476,150 ounces, a recovery from 1999, when mining of a poorer quality and the fall in international prices impacted.

The Minister mentioned a 13.9 per cent drop in the manufacturing sector and said the services sector performed better, with engineering and construction growing by 6.5 per cent, attributed largely to the greater investment in public building projects like schools, roads and such schemes.

Distribution grew by 5.2 per cent, reflecting more imports of consumption goods during the year and a 5.5 per cent increase in transport and communication, resulting directly from substantial growth in inbound and outbound telephone traffic and movement of passengers, parcels and mails.

Kowlessar said financial services also had a better showing by 5.5 per cent and Government spending rose by 10 per cent, principally because of the large wages and salaries hikes paid in 2000.

The Minister said the Government has a "comprehensive economic strategy" for implementation over the next five years and the $67.4B estimates should be seen as the first steps towards realisation of those goals.

Kowlessar said the proposals revolve around the theme `Moving Guyana Forward Together' and is "an imaginative attempt to build on the foundations that have been laid for this country's economic take-off, to promote its well-being and address many issues and concerns of the population.

"It (the budget) has been prepared against the background of a very hostile external environment," he stated.

Kowlessar said it was conditioned by domestic and foreign challenges that have and will continue to affect the economy and reflects a $2.5B increase over the $62.2B 2000 presentation.

Looking at the global economy for 2001, he said there are signs that growth will be slower than projected in September last year and recent forecasts have scaled down the projection from 4.2 per cent to 3.2 percent, with a more robust prediction of 3.9 per cent for 2002.

The Minister attributed the less optimistic outlook to the rapid slowdown of the United States economy - with its present projected growth at 1.5 per cent - and the moderation in Europe and Japan.

Growth in the Euro area is expected to be 2.4 per cent, climbing to 2.8 per cent in 2002 and the International Monetary Fund (IMF) predicts a substantial and more broadly distributed slowing of global economic growth than previously forecast, Kowlessar disclosed.

He said, while the overall perspective is encouraging, there are still significant risks and uncertainties.

Regardless of improved economic fundamentals in all major geographical areas, a number of countries - particularly in Latin America and the Caribbean - continue to experience financing difficulties.

"The ongoing tightening of global financial conditions could accentuate the problems of accessing cheap credit. This would impose an inordinate burden on these countries to reduce their exposure to external shocks, even as they seek to take advantage of the world economic expansion," Kowlessar said.

The Minister listed the persistence of it in the midst of plenty as another of the burning issues and said sustained reduction of poverty requires stronger growth that benefits the poor.

The affected countries must continue to work towards improving their macro-economic conditions and their efforts have to be supported by the international community, which could start by fully funding the Highly Indebted Poor Countries (HIPC) initiative and allow debt relief to be delivered to the poorest.

Kowlessar called for reform in trade policies that discriminate against poor countries (especially agricultural trade) and provision of resources for mitigating the harmful effects of globalisation and reversing the decline in official development aid.