In his report at the bank’s annual general meeting last week, Reis said crime, political instability, a deteriorating Government -labour union relationship and external/internal shocks pose the greatest risks to economic performance.

Such shocks, he said, could undermine macroeconomic management, productive efforts and business and consumer confidence.

“The environment is not one which will attract sufficient investment, both domestic and foreign, of which Guyana is in dire need…”, Reis told the meeting at the Georgetown Club on Wednesday.

He noted that production and productivity are hampered; the exodus of qualified and skilled staff to foreign countries is having a severe impact on operations and some companies have closed and their owners and families migrated to what they consider a safe and stable environment.

Reis, in a review of the economy in 2002, said it was a very challenging year with a downturn as a result of world events and continued political instability and with security shattered by a crime wave. This, he said, created a “state of fear and violence and a climate in which no individual or businessman can thrive.”

Preliminary estimates showed a modest recovery of 1.5% in 2002, compared with a budgeted projection of 2.00%.

Reis said growth was driven by the agricultural sector, mainly through increased sugar production, with positive contributions from poultry, manufacturing, engineering and construction, transport and communication and financial services.

Rice, bauxite, gold and fishing made unfavourable contributions, he reported.

The rate of inflation on the basis of the consumer price index was 6.00% compared with 2.00% in 2001, a sharp increase to which higher electricity, water and telecommunication charges, food, medical and personal care contributed.

The rate of exchange of the Guyana dollar relative to the U.S dollar depreciated by 1.60% during the year.

Reis said against the background of a decline in treasury bill rate and private sector credit, Citizens Bank’s performance can be considered “good” with increases in deposits, loans, investments and income.

Private sector credit declined by 7.73% to $46.5Bln at September 30, 2002 as a result of the economic slowdown.

Reis said commercial banks continue to find it difficult to identify and lend to viable private sector projects in the present environment, with high loan default rates and significant provisioning for bad and doubtful debts.

“The enforcement of financial contracts in the course of debt recovery through the legal system is slow and frustrating and adds considerably to the cost of doing business,” he said.

Total deposits held by commercial banks increased by 10.63% to $102.9Bln at September 30, 2002, with the private sector accounting for $80.4Bln or 78.12%.

Reis said Citizens Bank was able to realise an after tax profit of $152.1M in 2002, representing a 37.00 % increase over the year 2001.

Deposits increased from $6.6Bln to $8Bln over the 12-month period under review; interest income went up 4.0% to $816.1M; loan loss provision increased by $25.8M to $116.4M and loans and advances from $3.6Bln to $4.5Bln.

The bank approved more than 120 mortgage loans totalling $200M in low-income neighbourhoods and also made consumer and small business loans to residents in these areas, Reis said.

This year, it plans to bring additional sources of capital and financing solutions to corporate customers in the forms of lease and floor plan financing.