February 21, 2009 | By knews
Filed Under Editorial
The economic projections in the January 2009 report on Guyana by the
Economic Intelligence Unit are far different from those of the Finance
Minister Dr Ashni Singh in his 2009 Budget.
According to the report, following estimated real Gross Domestic Product
(GDP) growth of 4.6 per cent in 2008, the EIU expects economic growth to
slow to 1.8 per cent in 2009 as external conditions worsen.
This is contrary to the three per cent growth predicted by Dr Singh and
severely challenged during the 2009 Budget debate in the National Assembly.
The forecast for 2010 did appear better in that the EIU expects a modest
improvement, with GDP growth rising to 2.2 per cent. It also projected that
gross fixed investment growth will slow to 2.3 per cent in 2009 as current
building projects at the Skeldon sugar factory and the Berbice Bridge reach
It was pointed out that other large investment projects, such as the Amaila
Falls hydroelectric project and the proposed alumina plant at Linden, are
unlikely to begin during the forecast period.
It noted also that an important source of growth will be exports and,
although EIU expects export values to fall by over 30 per cent in 2009, the
value of gold exports should remain high, while demand for rice and sugar
which are Guyana's two most important export crops would remain roughly
Sugar output is expected to be buoyed by the completion of the Skeldon sugar
factory. "However, GuySuCo (Guyana Sugar Corporation) will have to contend
with a 12.5 per cent cut in the sugar price in euro terms, from US$727.
"This lower price will be in place until the termination of the sugar
protocol in September 2009, after which there will be free access for
increased quotas at an unspecified guaranteed price until September 2012,"
according to a report by the Economic Intelligence Unit.
It noted also that flooding and other weather-related hazards remain an
ongoing risk for agriculture, and indeed for mining and other economic
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The Parliamentary Opposition has also been critical of the budget, pointing
to what it sees as glaring inefficiencies and misrepresentations. But the
government has hit back, accusing the Opposition of ignoring the basic
However, the Economic Intelligence Unit seems to be in the corner of the
political opposition, pointing to the anticipated shortfalls that the budget
either ignores or fudges to look better than the reality.
Already, much is being made of the fact that taxes form the bulk of the
budget when export earnings should have been the major revenue earner. Taxes
will account for more that seventy per cent of the budget, fuelling the
calls for a reduction in the value added tax, which the Opposition says is a
The government, however, sees this tax as necessary since it allows for the
improvement in the welfare of many Guyanese. This tax helps fund certain
social services such as old age pensions, subsidy of the electricity and
water sector, and cushioning the nation from some of the hostile prices on
the world market.