The International Monetary Fund’s (IMF) 2023 report on Guyana revealed no signs of inflationary pressures or economic overheating despite the substantial influx of oil revenues since 2020. Concerns had lingered about Guyana falling prey to the resource curse.
Since the inception of oil production in 2019, the IMF said Guyana’s economy has surged, tripling in size and significantly raising its GDP per capita from being one of the lowest in Latin America and the Caribbean during the early nineties.
The rapid escalation of oil production contributed to Guyana achieving the highest real GDP growth globally in 2022, reaching an astounding 62.3%. With the infusion of oil revenues, which were initially allocated to the budget in 2022, the government has embarked on substantial investments to address extensive developmental requirements.
Despite this meteoric rise, the fundamentals of Guyana’s economy remain robust, with the IMF report asserting the absence of inflationary pressures or signs of overheating thus far.
“The government’s commitment to investing in human capital, reducing energy costs, bolstering infrastructure development (including climate change adaptation measures), and supporting non-oil GDP growth is anticipated to sustainably drive the economy forward,” the report detailed.
The IMF forecasts an exceptionally high real GDP growth rate of 38.4% in 2023, with an average annual growth rate of around 20% from 2024 to 2028.
The IMF also anticipates a continued accumulation of gross international reserves, strengthening reserves coverage, and significant savings accruing in the Natural Resource Fund (NRF) over the medium term. According to the NRF Act, annual transfers from the NRF to the budget will finance a substantial portion of the augmented public capital spending, addressing the nation’s developmental necessities.
While the economic prospects for Guyana are notably optimistic, the report highlights balanced risks. Upside risks include the possibility of further oil discoveries, leading to an enhanced long-term economic outlook and potential construction booms fostering higher-than-projected short-term growth. Conversely, downside risks encompass concerns regarding overheating, inflationary pressures, excessive appreciation of the real exchange rate, volatile commodity prices, adverse climate shocks, and governance issues, all of which could negatively impact the nation’s economy.