Guyana Times

GEORGETOWN
EnergiesNet.com 08 30 2022

Even as the regional commodity terms of trade (TOT) are expected to fall by an average of seven per cent this year in Latin America and the Caribbean, Guyana has been named among a group of countries in the region that will benefit from this trend.

This is according to the Economic Commission for Latin America and the Caribbean (ECLAC) annual report titled “Economic Survey of Latin America and the Caribbean 2022: Trends and challenges of investing for a sustainable and inclusive recovery”. The report examines the region’s economic performance in 2021 and analyses trends in the early months of 2022, as well as the outlook for growth for the year.

It explained that the seven per cent decrease in the regional commodity TOT – which is the ratio between the index of export prices and the index of import prices – is caused largely by a 20 per cent rise in the prices of commodity exports and a 29 per cent increase in commodity imports’ prices.

“As usual, performance will vary from one subregion to another. Net hydrocarbon exporting countries will benefit most in 2022 from an increase in the commodity terms of trade of around 17 per cent. The countries in this group are the Bolivarian Republic of Venezuela, Colombia, Ecuador, the Plurinational State of Bolivia, and Trinidad and Tobago. This group also includes Guyana and Suriname, which, although they have a small share of the world oil market, have significant reserves and major production potential,” the ECLAC report forecast.

It went on to note that while some of these countries need to import refined products to meet their domestic demand, they maintain a hydrocarbon trade surplus. In contrast, however, the rise in energy prices is detrimental to hydrocarbon importers, particularly the other Caribbean countries and those of Central America, whose commodity TOT will deteriorate.

In South America, the effect is mixed, as some countries are oil producers, so they benefit from the higher price; but they also import refined products, which are currently more expensive, the report found.

High-energy prices

Moreover, ECLAC, a United Nations organisation, further outlined in its report that although net exporters of hydrocarbons will benefit the most from the 17 per cent hike in the TOT for commodities, an opposite result would be seen for importers when it comes to increasing energy prices.

“…this rise in energy prices is detrimental to hydrocarbon importers, particularly countries in the Caribbean (except Guyana and Trinidad and Tobago) and Central America, whose terms of trade of commodities will deteriorate. In South America, the effect is mixed, as some countries are oil producers, so they are expected to benefit from the higher price, but they also import refined products, which are currently more expensive,” the report further highlighted.

It was found that after recording 6.5 per cent growth in 2021, the Gross Domestic Product (GDP) of Latin America and the Caribbean was expanding at a projected rate of 2.7 per cent on average, following a slowdown in the first half of this year, thus returning to the path of low growth it was following before the COVID-19 pandemic.

Nevertheless, South America is projected to grow by 2.6 per cent in 2022 compared to 6.9 per cent in 2021, while the group comprising Central America and Mexico expand by 2.5 per cent against 5.7 per cent in 2021. The Caribbean – the only subregion that will grow more than in 2021 – is projected to increase by 4.7 per cent, if Guyana is excluded, in comparison with 4.0 per cent in the year earlier.

Withdrawal from oil fund

In the Caribbean, total revenues are expected to increase again in 2022, driven mainly by rises in tax revenues and revenues from other sources, such as non-tax revenues, capital revenues, and external grants. In the case of Guyana, non-tax revenues are expected to rise substantially owing to a first withdrawal of resources from the sovereign wealth fund, in which the country deposits its revenues from crude oil production offshore.

On the other hand, the Caribbean’s public spending is expected to grow in 2022, driven by public investment and higher interest payments. At the country level, it was highlighted that a significant expansion of public investment is expected in Guyana, financed in part by the withdrawal from the new oil fund.

At the launch of the ECLAC report at the UN Central Headquarters in Santiago, Chile on Tuesday, a projected 2.7 per cent average economic growth was revealed for the current year in a context of acute macroeconomic restrictions that are hurting the region’s economies.

It was further outlined that a sequence of crises has led to the scenario of low growth and accelerating inflation seen in the global economy, and this – coupled with lower growth in trade, the dollar’s appreciation and tougher global financial conditions – will negatively affect the region’s countries.

“In a context of multiple goals and growing restrictions, there must be a coordination of macroeconomic policies that would support the acceleration of growth, investment, and poverty and inequality reduction, while also addressing inflationary dynamics,” acting Executive Secretary of ECLAC, Mario Cimoli stated during the launch of the Economic Survey 2022.

The document emphasises that Latin American and Caribbean countries are facing a complex economic outlook in 2022 and the coming years. (G8)

guyanatimesgy.com 08 29 2022