Unbalanced Growth: Guyana’s Manufacturing and Agriculture Sectors Declined by 10 Percent Each, Despite Economic Growth of 3.3 Percent in 2016  

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The value of all goods and services produced in the economy — also called Gross Domestic Product (GDP) — for 2016 totaled $398 billion, according to the Bank of Guyana 2016 annual report.[1] This amount represents an increase of almost $12 billion, or 3.3 percent, over GDP in 2015. Economic growth in 2016 was roughly the same as in 2015.

The overall growth of 3.3 percent was largely because of the 46 percent increase in output in the mining and quarrying sector. Within mining and quarrying, gold output increased by more than 58 percent over the previous year.[2] Likewise, bauxite production increased by almost 2 percent over the previous year. Growth in these sectors helped prevent an overall decline in the economy. However, production in these sectors has more to do with chance than government policies. Thus, these sectors are high-risk and are not a reliable source of sustained economic growth.

 

Despite a positive overall growth, output in the manufacturing and agriculture sectors dropped by 10 percent each (see chart above). The decline in these sectors represents a significant shift in their performance. Between 2009 and 2015, output in manufacturing and agriculture grew uninterruptedly by an average of 5 percent and 3 percent, respectively. Moreover, a decline of 10 percent in each of these sectors put many jobs and families at risk. The agriculture sector employs 21 percent of the country’s workforce, according to data from the World Bank.[3] Likewise, the industrial sector including manufacturing employs 24 percent of the country workforce.

The services sector remains the largest sector, representing more than half of the economy. However, services grew the least, by only 1 percent over the previous year. This represents a significant decline from the 5 percent average annual growth between 2009 and 2015.[4] The low growth in services corresponds to a decline in private consumption spending of almost 15 percent over the previous year. [5] The decline in private consumption spending suggests a decline in business and consumer confidence over the same period. Further, this loss of confidence was likely the result of changes in government policies, though other factors may have contributed. The services sector employs 51 percent of the country’s workforce.[6]

Policy Implications

The significant decline in manufacturing and agriculture output and the slowdown in services sector activities indicate a major shift from stable growth to more high-risk growth in the economy. Accordingly, the government should adopt policies to restore consumer confidence and thus private consumption spending, and attract new investments to boost growth. This includes rethinking current policies that may have contributed to the significant decline in manufacturing and agriculture sectors, and develop new policies to stimulate widespread growth. Priority should be placed on sectors with the highest potential return in job creation and household income. Stimulating the economy also includes investing in quality and efficient public services that create an attractive business environment. 

 

Notes

[1] Bank of Guyana, Annual Report 2016. Table 10-II. p.146. GDP figures used are based on 2006 dollars.

[2] Supra note 1.

[3] Work Bank, Data, Countries and Economics, Guyana. The data used is for 2002, the latest year for which such data is available.

[4] Supra note 1.

[5] Bank of Guyana, Annual Report 2016. Table 10-I. p.145.

[6] Supra note 3.