IMF predicts year end 7.5 % inflation rate for Guyana
Kaieteur News
December 7, 2006
Heightened activity in the construction industry in preparation of Cricket World Cup (CWC) 2007 is one of the driving forces behind the economic growth in Guyana and other countries within the Latin America and Caribbean (LAC) region.
Senior Advisor in the Western Hemisphere Department of the International Monetary Fund (IMF), Christopher Towe said the current growth in the region's Gross Domestic Product (GDP) was also attributed to the recovery from natural disasters and remittances from abroad.
On Wednesday, Towe unveiled the economic outlook for the LAC region to a gathering that included Minister of Finance Dr. Ashni Singh, Minister within the Ministry of Finance, Jennifer Webster, members of the private sector and members of the diplomatic community at the Grand Coastal Inn, at La Ressouvenir, East Coast Demerara.
Towe projected a five percent growth in GDP, but noted that he was being careful since the IMF was yet to release the final projections.
The IMF economic outlook for the LAC region predicts that Guyana will end 2006 with 3.5 per cent output growth and a 7.50 per cent inflation rate, the highest in the last three years. The inflation rate at the end of 2005 was 6.9 per cent, while in 2004 the inflation rate stood at 4.7 per cent.
The IMF is projecting that in 2007, the inflation rate will decrease to 4.4 per cent.
Guyana 's growth is on par with the general economic growth for the region, which recorded a GDP growth of 4.75 per cent.
He said that the growth in the entire LAC region was generally due to the easing of commodity prices which provided realistic growth and the recovery of larger economies, particularly Argentina .
Towe noted that the growth in the LAC region was relatively understandable when compared with global trends, especially economic growth in the US .
He added that global economic activity dipped in 2004, but there has been a healthy rebound over the last few years.
Towe stated that the remarkable growth in the region's GDP is astonishing given the high prices for fuel globally.
“Despite the huge run-up in oil prices…inflation has been remarkably contained. Unlike past episodes when there were oil shocks, there is not much being transferred from oil prices to consumer prices. It is quite unusual,” Towe stated
He noted that there was a sharp spike in oil prices; however, in the developing countries, the inflation rate has trended downwards and this reflects a shift towards service-based economics instead of production-based.
Towe noted that most of the growth in the region is coming from Trinidad and Tobago which is benefiting from the increased prices for oil.
While inflation has been largely contained in the Caribbean, Towe pointed to signs of overheating in the Caribbean ahead of CWC.
“Times are good, external conditions are extremely favourable and the conditions for continued growth are robust,” Towe predicted as he gave projections for 2007 for the LAC region.
However, he warned that because of the uncertainty of the US economy, oil prices and global imbalances could see a depletion of the current economic growth in 2007.
Towe projected a slight decline in the region's growth that could see a shift from 4.75 per cent to 4.25 per cent in 2007, which will slow the most vigorous three year period of economic growth since 1970.
Towe posited that the current account deficits have to be financed, noting that for the LAC region the surge in remittances, which has increased by over 13 per cent of the GDP for the 2004 to 2006 period, was a positive sign.
In some cases, the IMF advisor noted, the large inflows of remittances were posing a challenge for monetary policy makers since the funds coming in from abroad were putting pressure on prices locally.