In a mid-year assessment of the economy, the PSC said, however, that if significant new growth does not occur in "the weak services and rice sectors" during this half of the year, the two per cent real GDP growth projected in the Government's 2002 budget would not likely be achieved.

The group said that while sugar production rose over the first five months of 2002 compared to previous annual levels, rice production declined over the same period and prices again weakened marginally. It said that low prices and heavy indebtedness have forced a number of rice farmers out of business.

According to the PSC assessment, poultry was a notable success story with a sharp rise in production and the improved technology. However, a decline in the production of eggs was noted.

The Economic Policy Unit of the commission, which did the assessment, pointed to a contradiction in data from the Guyana Forestry Commission and the Statistical Bureau.

Data from the Forestry Commission, according to the PSC, pointed to a substantial decline in forest-product output, some 88 per cent of which is represented by raw logs.

The PSC said this appears to be consistent with the poor weather conditions, high borrowing costs by the industry and the closure of Barama's Port Kaituma operations.

According to the report, prospects for production later in the year appear brighter with new cost-effective operations expected to come on-line. The PSC said that data from the Statistical Bureau suggested a contradictory rise in production.

Data problems caused the PSC unit to express uncertainty concerning the manufacturing sector. While production data suggested some creditable strength in certain areas, the PSC said weak commercial bank lending to the sector seemed to imply a less optimistic assessment.

The commission said that while production data for the services sector is not available, an attempt to gauge the strength of the sector through growth in commercial bank lending to the distribution trade pointed to weaknesses.

Bauxite and gold production was reported as being lower than last year and according to the PSC the opening of new mining areas and an influx of diamond miners from Brazil contributed to output of the gemstones more than doubling in the period under review.

According to the report, at the end of May, consumer prices rose by 5.2 per cent, while the exchange rate remained reasonably stable over the period.

It noted a slow pace in lending by commercial banks to the manufacturing and service sectors. The unit said the high level of non-performing loans, high levels of excess liquidity in the system and consequent high interest rates are seen as worrying factors that will dampen prospects of early and rapid economic growth.

The fiscal position of the Government deteriorated modestly over the review period despite rising tax collections, the PSC stated, noting that while domestic debt has been in decline, foreign borrowing has risen.