Guyana – fastest growing economy at 62%

Guyana is a country the size of the UK but has a much smaller population – 720,000 compared to 60m in the UK. Located on the north-east corner of the Amazon the country has recently become an oil bonanza with production increasing 57% in 2021 to 110,000 bpd. It is projected to reach 720,000 bpd by 2026. Guyana’s economy grew by 62% in 2022 which was the highest growing economy on the planet according to the IMF.

In 2015 GDP per capita was US$11,000 but according to the IMF this is now expected to be US$60,000 by the end of this year. Furthermore with oil coming on tap it is projected to grow a further 37.2% in 2023 and with that comes oil reserves of 11bn barrels. See table below for present value of oil reserves per capita

Resource curse – the term resource curse refers to a paradoxical situation in which a country underperforms economically, despite being home to valuable natural resources. A resource curse is generally caused by too much of the country’s capital and labor force concentrated in just a few resource-dependent industries. Some economies rely on exports of oil, iron ore or other resources to fund its spending. This has the effect of increasing the value of the currency and although this will make imports cheaper once the resource runs out or global prices start to drop the overvalued currency falls causing a large increase in imported prices. So what can Guyana’s government do to minimise the impact of the resource curse?

1. Set up a fund like that of Norway’s sovereign wealth fund. This has been actioned with the establishment of a natural resources fund (NRF) which is governed separately from the executive. A law has been created that if the finance minister does not declare, within a period of time, the total revenue from oil paid into this fund each year, he/she could face up to 10 years in prison. Also the use money in the NRF has to be approved by the parliamentary system. The concern is if power comes with the chance to get rich by corruption and stealing form the state, the competition for office can become violent.

2. Greater subsidies into non-commodity industries like tourism as Guyana has significant potential with its natural environment.

3. With greater income from commodity industries it should develop domestic demand when international demand is subdued.

4. Investment in infrastructure and training/education is essential so that the entrepreneurial environment is vibrant. Avoid inertia and use the good times to plan ahead. With such a small population they need skilled labour to build up infrastructure, including roads, schools, health care and climate protection. As better infrastructure helps citizens educate their children, improve the quality of their homes and start or expand businesses, the state should gradually increase the sums released directly to people.

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