Fitch ups Guyana’s growth forecast as oil prices remain high

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Fitch Solutions, regarded as one of the top three credit rating agencies in the world, has upped its growth forecast for Guyana this year on account of high oil prices. The report from Fitch Solutions Country Risk & Industry Research states that Guyana’s Gross Domestic Product (GDP) forecast was moved from 38.0% to 40.5%. Fitch said this projection was increased on account of elevated global oil prices. The company believes the prices, which are currently above US$100 per barrel Brent, will fuel faster growth in Guyana in 2022 in two ways.

“First, higher prices will drive stronger public revenues, allowing the government to spend more on social programmes and capital investment. Second, elevated oil prices will likely prompt international oil companies to expand exploration and development projects in Guyana, bolstering investment,” Fitch said.

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The Credit rating agency noted however that the upside for the economy will be limited by the impact of higher inflation on private consumption while adding that Guyana has structural constraints that will limit the market’s ability to replace the loss of Russian crude oil in international energy markets.

Outside of Fitch’s projections, the Government of Guyana has said that the country is poised to realize a 47.5 percent GDP on account of the oil sector.

With respect to Jamaica, Fitch revised its growth forecast from 4.2% to 3.7%. It reasoned that as higher commodity and shipping prices push up Jamaican inflation, it will undercut private consumption. In addition, Fitch said weaker growth in key tourism source markets – particularly the US – will hit Jamaica’s tourism sector, though it expects tourism activity will grow year over year in 2022 following a slow recovery in 2021. If the Jamaican Labour Party (JLP)-led government pivots away from fiscal consolidation and announces exemptions to the value-added tax or import duties, Fitch said it would likely help mitigate inflation and support private consumption.

As for Trinidad & Tobago (T&T), Fitch said its forecast has moved downward from 3.4% to 3.0%. In 2022, the UK firm said it forecasts oil and gas production will accelerate in T&T amid higher global prices, which will bolster real exports, government revenues and investment into the country’s hydrocarbons sector.

Trinidad’s oil-driven economy in shambles; Guyana working to be an exception – VP Jagdeo

However, as global commodity prices rise and it becomes more expensive for T&T to import goods, Fitch warned that inflation will head higher, thus dampening private consumption. “In our view the government is already likely to draw down its Heritage & Stabilization Fund (HSF) to fund deficit spending, limiting its ability to increase subsidies to offset the cost of imports,” the Group stated.

Caribbean: 2022 REAL GDP GROWTH FORECAST REVISIONS

Country Old Forecast New Forecast
Cuba 3.8% 2.5%
Dominican Republic 4.8% 4.5%
Guyana 38.0% 40.5%
Jamaica 4.2% 3.7%
Trinidad & Tobago 3.4% 3.0%
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