Caribbean Region Quarterly Bulletin

The Pandemic Saga Continues

Update on Coronavirus Pandemic

As of July 13, the total number of cases in Guyana increased to 297 cases, including 17 deaths. There is a total of 126 active cases who are in institutional isolation and 20 contacts of active cases in institutional quarantine. Five people are currently hospitalized in intensive care units. Though increasing, Guyana has fewer cases than Jamaica and Suriname (700+ cases), and more cases than Trinidad and Tobago, The Bahamas, and Barbados, all with less than 150 cases (Figure 1). The new daily cases are very volatile in Guyana, mostly remaining below ten per day, but spiking to 15 or more cases on three occasions. The total number of tests carried out in Guyana increased to 3,252. Although the Pan American Health Organization/World Health Organization (PAHO/WHO) announced in April Guyana would benefit from 7,000 additional testing kits, testing rates remain relatively low at 4.1 per 1000 people compared to 30.7 in Barbados, 9.5 in Jamaica, 6.4 in The Bahamas, 4.1 in Trinidad and Tobago, and 2.1 in Suriname.

Political Context

The outcome of Guyana’s regional and general elections remains uncertain. After having held elections on March 2nd, a 33-day national recount exercise was concluded on June 7th. This paved way for the Guyana Elections Commission (GECOM) to complete its elections report and make a declaration of results. However, this process has been mired in a struggle over the GECOM election report with questions about the validity of some ballots counted in the recount process. These questions were practically dismissed by the CARICOM observers of the recount process claiming the results of the recount process should be the basis for GECOM’s declaration of elections’ results. The question was raised to the Caribbean Court of Justice which ruled in favor of using the results of the recount process, signaling the opposition People’s Progressive Party/Civic had won the elections. The ele
ctions report prepared by the Chief Election Officer (CEO) of GECOM signaled the government APNU/AFC party had won the elections, after a qualification of which votes to count. The Chairperson of GECOM requested that the CEO’s report be consistent with the result of the recount process, without qualifications. The officer in charge of preparing the election report has not complied with the Chairperson’s request and the matter remains unresolved.

Settling the elections is important for the government to respond to the coronavirus pandemic. As Parliament was dissolved for the elections in December 2019, the government cannot pass legislation on economic policy or access oil revenues accumulating in the Natural Resource Fund. In the first semester of 2020, the government reported receiving approximately US$ 95 million in oil revenues.

Overview of Policy Response

The government responded to the crises by adopting the following measures: i) the suspension of all school activities for the year; ii) closure of the two international airports iii) creating the National Coronavirus Disease Task to coordinate the government’s action plan iv) granting of special powers to the Ministry of Health to prevent and control the spread of the disease, and v) on April 3, the government announced restrictions on public gatherings and movement, with only essential service businesses remaining open and an evening curfew, which has been extended to June 17th. Schools have been reopened only for students in grades preparing for special exams. Finally, the National Coronavirus Diseases Task Force announced a six-phase re-opening of Guyana. The first phase generally extends the initial lockdown measures to July 17th. However, special restrictive measures were applied to specific communities, including two mining areas due to recent infection surges, with measures extending to August 3.

Economic shock

Despite uncertainties related to the coronavirus, the political context, and the fall in oil prices earlier in the year, Guyana’s outlook remains positive due to the sheer volume of expected oil production. With Guyana beginning oil production in December 2019, one of the main transmission mechanisms of the global economic and health crises is through its impact on commodity prices, namely oil and gold, which are expected to be Guyana’s largest exports in 2020. Plummeting oil prices have contributed to updated estimates for Guyanese oil exports, government revenues, and GDP growth. The IMF revised the value of Guyana’s oil exports in 2020 from US$ 2.4 billion to US$ 1.3 billion, still representing Guyana’s largest productive sector. Similarly, while government revenues were originally expected to grow by 25.9% in 2020, this estimate has been revised down to 12.8%. Finally, Guyana’s GDP growth estimate was revised down from 85.6 to 52.8%, still a remarkable growth figure and the only positive one in 26 Latin American and Caribbean countries (Figures 2 and 3; IMF-WEO, October 2019; April 2020).

In the other leading sectors of the economy such as agriculture and mining, authorities are reporting signs of limited impact. Agriculture and mining were the largest sector of the Guyanese before oil production, representing approximately 16 and 14% of GDP, respectively. The mining sector is expected to benefit from higher profit margins due to lower fuel costs and higher prices of gold. Globally, the price of gold increased from US$ 1,400 at the end of June 2019 to approximately US$ 1,720 currently, a 23% increase. Despite the favorable financial conditions, the public health situation and travel restrictions have affected both gold and bauxite operations in terms of worker availability and private sector measures prioritizing the safety of workers. Government authorities in the mining sector report expecting some impact, though the magnitude of the impact remains uncertain¹.

Other sectors of the economy are expected to have varied outcomes. Private sector authorities have reported that construction, retail retails, and tourism have been negatively affected, while food manufacturing and fish production have not been significantly affected². The three largest sectors following agriculture and mining are retail sales, construction, and transportation making up 35% of the economy. Government authorities related to rice production have painted an optimistic picture, indicating that falls in demand for rice in Europe has been offset by greater demand in the region. After gold, rice is Guyana’s greatest export representing approximately 14% of total exports (Figure 5).

Tax revenue collections are expected to remain flat in Guyana. Non-oil economic activity in Guyana could be approximated by tax revenue collections, which do not include oil-related income. Both GDP growth and tax collections are generally expected to contract across the region in 2020. The IMF estimates tax collections are expected to remain flat in Guyana, growing by 0.5%, while they are estimated to decline by an average of 4.5% across the region (IMF-WEO, 04/2020).

In terms of the external accounts, the current account and trade balance have been updated to reflect significant deficits beginning in 2018. The IMF updates show trade and current account balances reaching their low point in 2019 right before the beginning of oil production. The trade deficit declined to 53% of GDP and the current account deficit to 40% of GDP (Figure 4). The current account deficit is financed by net foreign direct investment inflows of also 40%. These dynamics are explained by foreign oil operators increasing production-related imports and may be accounting for the cost of the first oil production vessel, reported to be valued at more than US$ 1 billion. The trade balance is expected to climb significantly in 2020, after accounting for oil production, reaching a deficit of 13% of GDP. Figure 4 shows how the current account balance is weighed down by net labor/investment income outflows, one of the components of the current account balance, since in 2020 and 2021 it reflects net outflows offsetting oil export earnings. Oil exports as a share of GDP are estimated to be 19% and 22% of GDP in 2020 and 2021, respectively, while labor/investment income outflows are estimated to be -16% and -19% of GDP. In fact, by subtracting these net outflows from GDP and approximating a measure of Gross National Income (GNI), the economy is estimated to grow by 28.5% in 2020.

In the social sector, the crisis is impacting both lives and livelihoods. To understand how, the Inter-American Development Bank carried out an online socioeconomic survey across all 6 countries of the Caribbean. In Guyana, almost 1,700 households responded in April 2020. Some key trends emerged across the survey data. Among the households surveyed, the percentage of households earning less than the minimum wage increased from approximately 13% in January 2020 to approximately to 45% in April 2020. Figure 6 shows consistent reductions across all income levels in households earning above the minimum wage as reflected by the blue box representing April 2020. Figure 7 shows the highest share of households suffering job losses and business closures are from the lower levels of the income distribution. Almost 60% of households earning less than the minimum wage suffered job losses while around 16% of households earning 11 times the minimum wage suffered job losses.

These dynamics have influenced food security and domestic violence. Figure 8 shows that some households are struggling to cover some basic needs with 31.4% of households earning less than the minimum wage reported going hungry in the past week and 55.9% reported eating less healthy. These adverse effects remain prevalent but lower among higher income households. Finally, the risk of greater domestic violence potentially increases with stress and confinement. Contrary to regional trends, households from higher levels of income report experiencing greater domestic violence, increasing from 11.3% for low income households to 16.8% in higher income households.

¹ https://www.stabroeknews.com/2020/05/24/news/guyana/covid-19-causes-major-disruption-to-large-scale-mining/
² https://www.stabroeknews.com/2020/05/29/news/guyana/private-sector-urges-govt-to-buy-crops-to-support-farmers-feed-citizens/