Summary

The economic policies coupled with the strategic investments in the economy by the Government have been yielding the desired positive impact at the household level in respect of increasing household net disposable income and net wealth. Towards this end, during the period 2021-2024 households’ net disposable income grew by $116.8 billion (75%) from $155.8 billion in 2021 to an estimated $273 billion, together with an additional estimated $60 billion for the low-income category (below the income tax threshold), thereby resulting in an estimated total of $333 billion in 2024. Altogether, household net wealth increased by an estimated $118.5 billion (35%) from an estimated position of$342.7 billion in 2021 to an estimated position of $461.2 billion in 2024 (Q1). Further,household savings represented 24% of non-oil GDP in 2019, which rose to 29.4% in 2023;household net disposable income represented 11.3% of non-oil GDP in 2019, which rose,to 24.3% in 2023; and household net wealth represented 29.3% of non-oil GDP in 2019, which rose to 35.5% in 2023.

Introduction

This article seeks to address the question raised by the mainstream media in respect of the Government’s policies, initiatives, and programmes towards increasing disposable income. The analysis contained hereunder goes beyond the question by analyzing the impact and the outcome thereof.

Discussion and Analysis

Methodology and Limitations

In order to determine the level of growth in individual and corporate wealth for the years 2001-2024, the author considered the total deposits and total loans and advances in the banking sector for both individuals and the private sector separately. This data was used to calculate the net worth for individuals and net assets in the case of the private sector enterprises, on the assumption that the loans and advances portfolio are collateralized with tangible non-current assets. In the calculations, a Loan-to-Value (LVR) ratio of 70% was considered since financial institutions typically do not lend beyond 70% of the market value of the pledged collateral. In so doing, an additional 30% (conservative estimate) was applied to the loan value reported to estimate the market value of the assets.

Given that the disaggregated data on taxes collected by the State is publicly available in the National Budget Estimates, it is possible to mathematically calculate the national income for individuals and self-employed persons by solving a mathematical equation with the two known variables (taxes collected and the tax rates), to find the value of the unknown variable (X) representing individual income or profit before and after tax for companies. In order to do so, the author applied the average individual income tax rate of 30% for the period 2001-2024(F) and an effective individual income tax rate of 23% to calculate the income for the period 2001-2024.

With the increased income tax threshold over the years, which effectively exclude low- income earners from the income tax bracket, this segment of the labour force population represent an estimated 20% of the total labour force population. This means that the income for this segment is excluded from the analysis. However, at the current average market rates for the low-income segment of the labour force, their estimated annual aggregate income is in the region of $60 billion annually (author’s estimate). This estimate is included in the final calculation of household net disposable income to arrive at the estimated $300 billion in 2023 and an estimated $333 billion in 2024

There are two main limitations: (i) bear in mind that the results of the analysis conducted are conservative given that individuals and companies do not necessarily pledge all of their assets as collateral. Thus, the net wealth is likely to be an understated value, (ii) the unbanked population in the 1990s versus over the last 15 years would have improved with the wide network of bank branches covering significant geographic spread across the ten administrative regions over the last three decades, and further aided by the financial inclusion policy adopted by the Bank of Guyana. In this respect, the author estimated that the unbanked population in the 1990s was 60%-70%, which is estimated to have declined to 20%-30% in the current environment (in the 2000s).

Growth in Household Net Disposable Income and Net Wealth

Increase over Various Periods (GY$ Millions) Unless Otherwise Stated

Over the period 2001-2024 (F) households’ net disposable income grew by $252.2 billion (1,235%) from $20.4 billion in 2001 to an estimated $272.6 billion in 2024; total individual deposits for the same period in the banking sector grew by $299.8 billion (364%) from a position of $82.4 billion in 2001 to $382.2 billion in 2024 (Q1); individual loans and advances grew by $41 billion (458%) from a position of $8.9 billion in 2001 to $49.9 billion in 2024 (Q1); real estate mortgages grew by $122.7 billion (1,056%) from a position of $11.6 billion in 2001 to $134.3 billion in 2024 (Q1); and altogether, household net wealth increased by an estimated $370 billion (406%) from an estimated position of $91.2 billion in 2001 to an estimated position of $461.2 billion in 2024.

During the period 2001-2010 households’ net disposable income grew by $22.7 billion (111%) from $20.4 billion in 2001 to $43.2 billion in 2010; total individual deposits for the same period in the banking sector grew by $67.6 billion (82%) from a position of $82.4 billion in 2001 to $150 billion in 2010; individual loans and advances grew by $12.4 billion (139%) from a position of $8.9 billion in 2001 to $21.4 billion in 2010; real estate mortgages grew by $22.2 billion (191%) from a position of $11.6 billion in 2001 to $33.8 billion in 2010; and altogether, household net wealth increased by an estimated $82.4 billion (90%) from an estimated position of $91.2 billion in 2001 to an estimated position of $173.6 billion in 2010.

During the period 2011-2020 households’ net disposable income grew by $83.4 billion (175%) from $47.7 billion in 2011 to $131.2 billion in 2020; total individual deposits for the same period in the banking sector grew by $86.6 billion (51%) from a position of $170 billion in 2011 to $256.8 billion in 2020; individual loans and advances grew by $17.5 billion (71%) from a position of $24.6 billion in 2011 to $42.2 billion in 2020; real estate mortgages grew by $50.4 billion (125%) from a position of $40.2 billion in 2011 to $90.6 billion in 2020; and altogether, household net wealth increased by an estimated $115.7 billion (58%) from an estimated position of $198 billion in 2011 to an estimated position of $313.7 billion in 2020.

During the period 2021-2024 households’ net disposable income grew by $116.8 billion (75%) from $155.8 billion in 2021 to an estimated $272.6 billion in 2024 (1.4x the growth obtained for the period 2011-2020); total individual deposits for the same period in the banking sector grew by $99.3 billion (35%) from a position of $282.9 billion in 2021 to $382.2 billion in 2024 (Q1); individual loans and advances grew by $6.2 billion (14%) from a position of $43.8 billion in 2021 to $49.9 billion in 2024 (Q1); real estate mortgages grew by $38.7 billion (40%) from a position of $95.6 billion in 2021 to $134.6 billion in 2024 (Q1); and altogether, household net wealth increased by an estimated $118.5 billion (35%) from an estimated position of $342.7 billion in 2021 to an estimated position of $461.2 billion in 2024 (Q1).

As shown in table 2 above, household savings represented 21.4% of GDP in 2019 (pre- oil production), which fell to 9.3% of GDP (post-oil production) in 2023. Similarly, household net disposable income represented 10.2% of GDP in 2019, which fell to 7.7% of GDP in 2023. Conversely, household savings represented 24% of non-oil GDP in 2019, which rose to 29.4% in 2023; household net disposable income represented 11.3% of non-oil GDP in 2019, which rose to 24.3% in 2023; and household net wealth represented 29.3% of non-oil GDP in 2019, which rose to 35.5% in 2023.

Conclusion 

Evidently, the Government’s economic policies and investments pursued in the economy have been yielding the desired positive impact at the household level. Moreover, during the last two (2) decades under the economic stewardship of the PPP/C Government, individual/household net disposable income and net wealth has grown considerably, thus signaling the positive outcomes of the government’s economic policies and investment in the economy.