The Kaieteur News, Wednesday, August 10, 2022, reported that the latest reports of the Inter-American Development Bank (IDB) has projected that for 2022, Guyana’s oil and gas resources will account for almost 60 percent of Gross Domestic Product (GDP), clearly outstripping the contributions of the other traditional sectors such as rice, sugar, bauxite, timber, and gold.
This level of domination, along with the heightened cost of living pressures, has forced former Finance Minister, Winston Jordan to conclude that the dreaded Dutch disease phenomenon is already in Guyana, the report cited.
The Dutch disease is a concept that describes an economic phenomenon where the rapid development of one sector of the economy (particularly natural resources like oil) leads to a decline in the growth of other sectors.
In that interview with the Kaieteur Newspaper, Jordan intimated that the government’s incessant “diversification talk” does not change the fact that the contributions of other sectors are declining due to what he believes is a clear case of economic mismanagement. Jordan reasoned that there is only so much blame that the government can throw at the feet of the COVID-19 pandemic and the Russia-Ukraine war. “Yes, those things do contribute to the economic strain, but they cannot be blamed entirely,” Jordan stated.
Expounding further, the former Finance Minister said, “Government is spending the oil money like wildfire and rushing the development of the oil without any care for environmental consequences that abound. Who will be left on the hook when we start experiencing acid rain when the 10 oil ships are out there releasing toxic gases into the atmosphere? It will not be ExxonMobil; they are just on the hook for eligible oil spill costs.”
Added to those environmental concerns, Jordan said the country is heavily dependent on oil; meanwhile, the traditional sectors are losing their competitive edge. Jordan said, “When you look at the non-oil performance and outlook, it is a sorry picture for Guyana.
The Dutch Disease is already here, oil is already dominating the economy. In the real sectors which include rice and sugar which are in distress, along with bauxite and gold, nothing much is happening. Their contribution is wanting, and it is the opposite of what the government is saying…”
The economist added, “You have never seen this level of poverty before and that is a symptom of the Dutch Disease…” Jordan had also cautioned citizens to not fall prey to “screaming headlines” about Guyana being the fastest growing economy in the world. He stressed this is nothing but a mere mirage to distract from the real economic danger at hand. The economist said the truth can be found in an examination of the dismal performance of the non-oil economy.
Economists have warned that Guyana could face a total collapse of its non-oil sectors within months which will trigger what is known in economic circles as stagflation. In economics, stagflation or recession-inflation is a situation in which the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high all at once.
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