Guyana’s Oil Surge Distorts Regional Outlook

CDB held its annual news conference on 11 February at which it predicted healthy economic growth for the region of 4.1% in 2020, but the projection is dramatically skewed by the oil-fuelled surge in growth in Guyana, which IMF projects at 85.6% for 2020.

guyana oil rig

The CDB has 19 borrowing member countries (BMCs), namely Anguilla, Antigua & Barbuda, Barbados, Belize, British Virgin Islands, Cayman Islands, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St Kitts & Nevis, St Lucia, St Vincent & the Grenadines, Suriname, The Bahamas, Trinidad & Tobago, and the Turks & Caicos Islands. For 2019, the bank reported: “Our BMCs recorded another year of low growth, averaging just about 1.0% in 2019, compared with 1.6% in 2018”.

The bank attributed the poor 2019 performance to “relatively sluggish global growth of 2.9%, prolonged drought in Belize, Haiti, and Jamaica, and social unrest in Haiti (where the economy contracted by 0.3%). On the other hand, hurricane reconstruction effort boosted growth in Anguilla (10.9%) and Dominica (5.7%) while the effects of Hurricane Dorian on The Bahamas were limited by coming in September after a record tourism season with the highest-ever number of visitor arrivals prior to the hurricane.

But if growth was subdued, the news on debt was encouraging. Barbados, which recorded a primary surplus of 6% of GDP in 2019 (compared with 3.5% in 2018), saw its debt-to-GDP ratio fall from 127% in 2018 to below 120%. In total, the debt-to-GDP ratio fell in ten BMCs, with the steepest declines in Barbados, Grenada (to below 60%), Jamaica (from 101% to 94.4%), and St Kitts & Nevis (also to below 60%). In The Bahamas, debt was also falling until Hurricane Dorian hit, taking the debt ratio back to 63.3%.

The Guyana factor

Looking ahead to 2020, the CDB makes it clear that the overwhelmingly dominating influence will be Guyana. Although Guyana is, by a factor of nearly 10 times, the largest of the 12 independent countries of the English-speaking Caribbean, on a per capita basis it has until now been the poorest, with a GDP per capita of US$4,578 against a regional average of US$12,600 (on 2017 figures). Even in absolute terms, Guyana’s GDP ranks it 5th out of 12 countries, ahead only of Belize and the tiny island states of St Lucia, Antigua & Barbuda, Grenada, St Kitts & Nevis, St Vincent & the Grenadines, and Dominica. But from this year onwards, all this will change.

In total, ExxonMobil has announced 16 oil discoveries in the Stabroek Block, and the gross recoverable resource from the offshore block is now estimated to be more than 8bn oil equivalent barrels. Output from the first discovery in the Liza field is expected to reach full capacity of 120,000 gross barrels of oil per day (bpd) in early 2020, and the total output from the Stabroek Block is expected to reach more than 750,000bpd by 2025. It is this that will fuel the 85%-plus domestic economic growth rate in 2020, lifting the region’s average to 4.1%.

But, away from Guyana, the CDB says that economic growth “will remain lopsided and below the sustainable rates needed for long-term resilience”. Of the 13 other independent BMCs, the IMF growth predictions for 2020 are: Antigua & Barbuda (3.3%), Barbados (0.6%), Belize (2.1%), Dominica (4.9%), Grenada (2.7%), Haiti (1.2%), Jamaica (1.0%), St Kitts & Nevis (3.5%), St Lucia (3.2%), St Vincent & the Grenadines (2.3%), Suriname (2.5%), The Bahamas (-0.6%), and Trinidad & Tobago (1.5%).