IMF Commends Guyana’s Economic Growth and Future Prospects

The IMF has praised Guyana’s remarkable economic growth, driven by oil production and public infrastructure investment, with projected GDP growth of approximately 10¼ percent in 2025. While inflation is expected to rise slightly, the country maintains a significant current account surplus and long-term positive growth outlook, provided it carefully manages economic risks. The IMF emphasizes the importance of governance, fiscal and monetary policies, and climate change initiatives for sustainable development.

The International Monetary Fund (IMF) has acknowledged Guyana’s exceptional economic growth in its Staff Concluding Statement for the 2025 Article IV Mission. This growth is driven by an increase in oil production, robust non-oil activities, and significant investments in public infrastructure. The IMF has noted Guyana’s real GDP growth rate averages approximately 47 percent from 2022 to 2024, marking it as the highest globally.

According to projections, Guyana’s GDP growth is expected to be around 10¼ percent in 2025, with the non-oil sector exhibiting even stronger growth at 13 percent. Inflation is projected to rise to about four percent by the end of 2025, from nearly three percent in the previous year. The fiscal deficit is likely to decrease from 7.3 percent of GDP in 2024 to under 5 percent in 2025, thanks to increased oil revenues countering public spending.

The IMF estimates that Guyana’s significant current account surplus, noted at 24½ percent of GDP in 2024, will decline to approximately nine percent in 2025 due to construction imports for the fourth oil floating production storage and offloading (FPSO) vessel. The medium-term outlook remains optimistic, forecasting an annual growth rate of about 14 percent driven mainly by the oil sector alongside a growing non-oil economy, which is expected to develop at roughly 6¾ percent annually.

While risks remain, the IMF suggests a balanced outlook. The authority emphasizes careful management of overheating pressures to avert inflation and real exchange rate issues that could undermine sustainable economic growth. Furthermore, the IMF commended Guyana’s dedication to maintaining macroeconomic stability, fiscal sustainability, and inclusive growth while recommending close monitoring of evolving economic trends.

Fiscal policies remain appropriate as the focus shifts to reducing the fiscal deficit consistently through to 2031. Utilizing the Natural Resource Fund (NRF), Guyana has significantly increased capital expenditure, noted at over 12½ percent of GDP. The IMF insists on establishing a comprehensive medium-term fiscal framework to reinforce sustainable fiscal discipline.

In terms of monetary policy, the IMF supports the current tight stance that has effectively controlled inflation. Recommendations include managing liquidity within the banking system and enhancing financial market operations to bolster monetary effectiveness. The IMF also stresses the necessity to strengthen the macroprudential framework to protect financial stability, suggesting improved supervisory capacity and data collection for the Bank of Guyana.

Guyana’s efforts to enhance governance in the NRF and its public sector operations have also been recognized. The increased transparency in petroleum revenues and new e-procurement systems are steps forward. Additionally, the nation’s commitment to strengthening its Anti-Money Laundering frameworks and compliance in the non-oil mining sector is particularly commendable, alongside developments in the Extractive Industries Transparency Initiative (EITI).

Guyana’s proactive stance on climate change, prominently reflected in its Low Carbon Development Strategy 2030, was highlighted by the IMF. The Gas-to-Energy project aims to provide stable electricity while progressing toward cleaner energy solutions.

Finally, the IMF acknowledged initiatives promoting inclusive growth by enhancing labor skills and addressing shortages. Efforts are underway to increase women’s labor market participation, which is crucial for long-term economic growth. The IMF commended reforms that enhance productivity, trade connectivity, and diversification of exports.

In conclusion, the IMF remains supportive of Guyana’s initiatives to modernize statistical systems, which will be essential in formulating effective government policies. The anticipated updates to various national accounts are expected to yield valuable data for future policy formulation.

In summary, the IMF has recognized Guyana’s exceptional economic growth, attributing it to the burgeoning oil sector and significant public infrastructure investments. They have projected continued growth and vital fiscal and monetary policies to bolster this expansion while addressing inflation and financial stability. Governance improvements and climate change commitments further exemplify Guyana’s dedication to sustainable and inclusive growth. The continued modernization of statistical systems will support informed policy decisions moving forward.

Original Source: newsroom.gy