Download Guyana - First Citizens

Guyana
Prepared by: Rajesh Ramroop
rajesh.ramroop@firstcitizenstt.com
Last updated: January 2015
COUNTRY
Guyana
Real GDP growth (%) 2014
Next General Election
Exchange Rate (GYD/USD)
CREDIT RATING
5.60%
Jul-16
200
S&P Foreign Currency
S&P Local Currency
Moody's Foreign Currency
Not rated
Not rated
Not rated
Major Trade Partners
Major Exports
GDP Composition
US; T&T; EU; Canada; Venezuela; China; Suriname; Jamaica
Agricultural products; Fuels and Mining products
Services (64%); Agri (22%); Mining (10%); Manu (7%)
RECENT ECONOMIC DEVELOPMENTS
ECONOMIC OUTLOOK
Guyana’s economy continued to grow as at 3Q14. Sugar output (24.1%) and rice (4.5%) increased due to favorable weather conditions and
increased yields respectively. Forestry increased by 42% while poultry meat production declined by 3.6%. The manufacturing sector showed
decreases in non- alcoholic beverages (-18.4%), liquid pharmaceuticals (6.2%) and flour (2%) and increases in ointments (24.9%), feeds
(7.9%) and paints (0.1%). In the mining sector bauxite production decreased (-20.1%) and gold declined (-12.2%) due to increased volatility
in world market gold prices. Diamond and stone production increased by 38.7% and 24.9% respectively. In the quarrying sector there were
increases in stone production (+21.7%) due to increased demand in the construction sector while sand production declined (-43.0%). The
economy is projected to grow by 3.3% according to the IMF in 2014.
Positive
INFLATION
Stable
TRADE BALANCE/ BOP
Stable
According to the Urban Consumer Price Index (CPI) there was a 0.5% increase in prices as at the end of 3Q14. There were price increases
in food (0.7%), clothing (1.3%) and miscellaneous goods and services (10.9%), offsetting a decline in transport and communication (-2.6%).
Inflation is projected at 2.6% for 2014 by the IMF.
Export receipts fell by 15.6% to USD837.0 million in 3Q14. This was mainly due to decreases in export of gold (-7.6%), bauxite (-7.3%),
sugar (-7.3%) and other exports (-6.1%). There were increases in timber (37.5%) and rice (8.4%). Merchandise imports declined by 3.9% to
USD1,302.6 million due to declines in imports of capital goods (-15.2%)and consumption goods (-1.7%). Fuel imports increased by 3.0%
due to an increase in import volume to offset lower prices. As a result, the merchandise trade deficit increased by 28.1% to USD465.6
million (USD363.5 million -3Q13). Remittances increased by 52.6% (USD105.7 million) to USD306.8million. The capital account registered a
lower surplus of USD168.5 million due to lower inflows from bilateral and multilateral agencies which decreased by 12.7%. The overall
balance of payments deficit fell by 39% to USD134.3 million for 1Q14 from a deficit of USD220.4 million for 3Q13 mainly due to a lower
capital account deficit along with increased private sector inflows and was financed mainly by a drawdown of gross international reserves of
the Bank of Guyana which were equivalent to 3.5 months of imports at the end of the quarter.
The Central Government’s overall fiscal position shifted from an overall surplus (USD59.54 million) to a deficit of USD32.8 million mainly due
to a 16.5% increase in current expenditure. Current revenue increased by 3.8% to USD515.21 million due higher receipts from VAT,
income and personal tax. Current expenditure increased to USD428.6 million due to higher transfer payments, employment costs and the
purchase of goods and services. Capital expenditure increased by 16.6% to USD132.9 million due to the restart of previously deferred
public sector contracts. External debt (-7.0%) declined due to higher principal and interest payments to Venezuela under the PetroCaribe
agreement and a USD35.9 million debt write off under the CMCF (Caricom Multilateral Clearing Facility). Domestic debt (-8.4%) decreased
as a result of lower issuance of 364-day treasury bills which offset the increase in the 91-day and 182-day treasury bills. External debt
service increased 9.7% to USD41.6 million, due to the increased debt repayments to the Inter-American Development Bank (IDB) and the
Caribbean Development Bank (CDB) while domestic debt service payments decreased by 56.3% to USD5.09 million mainly due to lower
interest payments on treasury bills (27.4%), debentures (22.5%) and the Caricom loan (5.2%).
Stable
FISCAL ACCOUNTS
OUTLOOK
Guyana was forecasted to expand at a rate of 5.6% in 2014 by the Guyana Central Bank. Both the IMF and BMI were more conservative and estimated growth rates of 3.3% and 4.0% respectively
mainly due to expected downward pressures on the price of gold. The IMF has projected growth of 3.8% in 2015. The country remains susceptible to the volatility of global commodity prices but this
volatility is expected to be tempered by the positive outlook for the US and stability in other Advanced Countries as well as falling oil prices. On the fiscal accounts there are concerns over debt
sustainability but the government has been implementing measures to address it. After being blacklisted by the Caribbean Financial Action Task Force (CFATF) and referred to the Financial Action Task
Force (FATF) due to the government’s inability to pass its Anti-Money Laundering and Countering the Financing of Terrorism Act, an agreement was made in late July resulting in an intergovernmental
agreement (IGA) between Guyana and the United States giving the country compliance with FATCA. On November 10 President Donald Ramoutar took the decision to prorogue parliament in order to
avoid a vote of no-confidence by the opposition coalition which has a majority by one seat in the parliament. According to the constitution, the President has up to six months to reconvene parliament
and as well as provisions that allow the government to spend from a consolidated fund for the first four months of 2015 while the national budget is on hold. The opposition has warned that the president
will use this time for political campaigning while President Ramoutar has stated that the prorogation is simply to allow for consensus to be reached between the Government and opposition. The
President has since declared that elections will be held on 11 May 2015.
First Citizens Research & Analytics holds a negative view on Guyana due to the current volatile political climate.
Guyana: GDP Growth Rate and Inflation Rate (%)
6
Guyana: External Current Account Balance (% of GDP)
20.0%
5
15.0%
4
3
GDP
2
Inflation
10.0%
5.0%
1
0
2011
2012
2013
2014
2015
2016
2017
0.0%
2011
2012
2013
2014
2015
2016
2017
DISCLAIMER
This report has been prepared by First Citizens Investment Services Limited, a subsidiary of First Citizens Bank Limited. It is provided for informational purposes only and without any obligation,
whether contractual or otherwise. All information contained herein has been obtained from sources that First Citizens Investment Services believes to be accurate and reliable. All opinions and
estimates constitute the author’s judgment as at the date of the report. First Citizens Investment Services does not warrant the accuracy, timeliness, completeness of the information given or the
assessments made. Opinions expressed may change without notice. This report does not constitute an offer or solicitation to buy or sell any securities discussed herein. The securities discussed in
this report may not be suitable to all investors, therefore Investors wishing to purchase any of the securities mentioned should consult an investment adviser.
DISCLOSURE
We, First Citizens Investment Services Limited hereby state that (1) the views expressed in this Research report reflects our personal view about any or all of the subject securities or issuers referred
to in this Research report, (2) we are a beneficial owner of securities of the issuer (3) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views
expressed in this Research report (4) we have acted as underwriter in the distribution of securities referred to in this Research report in the three years immediately preceding and (5) we do have a
direct or indirect financial or other interest in the subject securities or issuers referred to in this Research report.