The non-oil economy has expanded by 34.5% during the period 2012-2023. In nominal terms, the non-oil economy has increased from $830 billion in 2012, to $1.267 trillion by the end of 2023. Although the share of the oil economy’s GDP has grown larger than the non-oil economy; this does not mean that the non-oil economy is shrinking or contracting in size or output, a notion that the empirical evidence herein has disproven.
Introduction
One of the minority political parties, namely, ANUG (A New and United Guyana), contends that the non-oil sectors have declined, and that this decline signals the presence of the “Dutch Disease”.
Discussion and Analysis
The assertion by ANUG in relation to the “Dutch disease” exposes the party’s ineptitude in their ability to comprehend and apply basic economic concepts. What was described as the Dutch disease is not the Dutch disease. The Dutch disease has to do with the change in relative prices, viz-à-viz, any sharp appreciation of the exchange rate, which would cause imports to be far cheaper, and exports more expensive, thus internationally uncompetitive. Effectively, the Dutch disease would destroy the manufacturing / export sectors at the expense of the import sectors.
With respect to the notion that the non-oil economy is shrinking relative to the oil economy, this outcome cannot be determined by merely looking at a half-year report or the performance of a single year relative to the previous year. In order to properly determine whether such an eventuality has merit or not, one has to always analyze a time series of dataset, spanning a minimum of ten years. Because there is always a time lag between the implementation of economic policies and the outcome or impact thereof. And similarly, there is a time lag between the occurrence of uncontrollable eventualities and externalities (exogenous and endogenous factors) and the impact thereof as well.
Having said that, let’s look at a time series of data for the period 2012-2023 (11 years), to ascertain whether the non-oil economy has been shrinking or not.
GDP measures the value of aggregate output (production) in an economy in a specific time frame (usually a fiscal year). In the oil sector, oil production went from 120k barrels per day to over 600k per day in less than four years (reflecting an increase of >400%). This explains why the oil economy accounts for the largest share of GDP at this time. As such, it would be prudent to look at the non-oil economy separately to have a broader perspective and a better appreciation on the structure, size, and growth of the economy across all the sectors, especially the non-oil economy relative to the oil economy.
To this end, the charts below illustrate that all of the non-oil sectors: Agriculture, Forestry and Fishing; Mining and Quarrying (excluding crude oil); Manufacturing; Construction and the Services sectors have expanded by 28%, 16%, 29%, 55%, and 30% respectively.
Overall, the non-oil economy has expanded by 34.5% during the period 2012-2023. In nominal terms, the non-oil economy has increased from $830 billion in 2012, to $1.267 trillion by the end of 2023.
Evidently, it would be incorrect to say that the non-oil economy has been shrinking relative to the oil economy.
One has to also be mindful that oil production will peak by 2027-30. And, thereafter, the GDP growth rate will revert to the lower double- and single-digit growth rates. Cognizant of this reality, the Government is investing in other non-oil sectors, whose share of GDP will eventually increase when oil production will have plateaued.
Source: Author’s based on Bank of Guyana Data
Conclusion
In the final analysis, although the share of the oil economy’s GDP has grown larger than the non-oil economy; this does not mean that the non-oil economy is shrinking or contracting in size or output, a notion that the empirical evidence has disproven.