Economy's vulnerability cause for concern
- Prof Thomas
By Gitanjali Singh
October 1, 2000
Guyana's economy remains "highly vulnerable" to shocks be they internal, external or natural and resuming high growth levels as seen in 1991-7 will not be an easy task, economist Professor Clive Thomas says.
In an analysis of the impact of the Economic Reform Programme (ERP) on the economy in the `Poverty and the 1999 Guyana Survey of Living Conditions' report to the UNDP, Thomas says this vulnerability is a cause of much concern.
... "If looked at closely, it reflects as much the continuing lack of social, political and territorial cohesion of the country as it does the narrow range of products on which the economy still depends for the bulk of its income, employment and government revenue. In this situation, high growth rates will be difficult, if not impossible, to sustain uninterruptedly," Thomas asserted.
He notes that a large part of the growth in 1991-7 period was because of new policies of the ERP and the integration of significant sectors of the parallel economy into the formal economy. For him, "reaching a plateau on the growth curve was bound to occur, if only because the economic base has expanded in size and with it the benefits to be obtained from `catch-up' growth".
Guyana's growth path so far has been mainly extensive and dependent on natural resource exploitation principally in areas of mining, forestry and agriculture. Thomas says because of the competitive pressures of globalisation and regionalisation, Guyana needs to address issues of human resource development, innovation, production, research and development, and a science and technology policy urgently if economic growth is to be sustained.
Thomas' analysis considered the economy's performance before and after structural adjustment, noting that per capita GDP grew from $5,285 in 1992 (based on constant 1988 prices) to $7,414 in 1999, representing a 40% increase. There were also significant improvements in the macroeconomic situation with money supply, inflation and fiscal balance falling in the single digit range and the external debt dropping to US$1.2 billion in 1999. Export earnings also moved from US$382 million in 1992 to US$525 million in 1999.
However, the achievements were not smooth and uninterrupted.
The renowned economist says the experience of the ERP confirms that macroeconomic balance will always be a fundamental pre-condition for economic growth, given the major characteristics of the economy, in particular its openness and dependence on foreign investment.
"Maintaining of macroeconomic balance, however, has to be treated as a continuous engagement, and not a target, which once achieved, can then be relegated to the back burner of economic policy consideration. This is a basic and very important lesson to be learnt from the country's experience since the 1992/3 surveys," Thomas says. The surveys he is alluding to are the Household Income and Expenditure Survey and the Living Standard Measurement Survey. Thomas says because of the complex and integrated character of the hurdles facing the economy, economic policy has to take on an equally "omnibus and integrated perspective" to be effective.
"Ad hoc, partial, selective and uncoordinated sectoral interventions are unlikely to yield the benefits expected from policy interventions," he says. And for growth to be sustained and the spill over benefits into poverty and living conditions realised, continued support from the international economic environment well into the future will be needed.
Thomas notes that while Guyana has enjoyed high rates of growth compared with its CARICOM partners, the gap in the standard of living between Guyana and the rest of CARICOM (except Haiti) is still considerable and has widened in some instances. Guyana's Human Development Index, a measure of the citizens in a country standard of living, was 96. While compared with other developing countries Guyana's index is above average, compared with CARICOM and Latin America, it is the lowest.
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