Dodging Dutch Disease: Targeting Services in Guyana

• Since the start of oil production in 2019, Guyana’s economy has not merely grown but has taken off. This can be substantiated by the fact that in 2024, the real Gross Domestic Product (GDP) increased by an impressive 43.6%. In 2022, oil exports accounted for approximately 88% of total domestic exports, while sugar, gold, bauxite, shrimp, fish and fish byproducts, timber and rice contributed approximately 90% of the non-oil exports.
• The country stands as one of the world’s fastest-growing economies. More importantly, although the revenue gained provides an opportunity for the country to strategically attain global prominence through policy strategies and development agenda, overreliance on the sector can heighten the risk of “Dutch disease”, a phenomenon that may undermine the performance of non-oil sectors.
• Moreover, as a Small Island State (SIDs), Guyana faces challenges such as price volatility, limited market size, possibilities of rent-seeking and commodity dependence. As the country navigates the new economic transformation driven by the discovery of its new oil wealth, it is essential to understand the potential role that trade in services can play in Guyana’s diversification and sustainable growth.
• According to a joint report published by the World Trade Organisation (WTO) and the World Bank in 2023, the services sector accounts for half of global employment and two-thirds of global GDP, exceeding the combined contributions of the agricultural and other productive industries. In Guyana, both goods and services trade have maintained a positive relationship with GDP during the period 2005 to 2022. That is, increased international trade in goods and services increased Guyana’s earnings.
• Services such as engineering and logistics, driven mainly by the oil and gas industry, increased nearly fourteen times over the period 2005–2021. However, service exports have remained stagnant. Therefore, the paradox that remains is that Guyana currently has a consistent services trade deficit. Similarly, foreign direct investment (FDI) has largely focused on capital-intensive oil and gas projects, posing a threat of competition for labour and resources within the oil and gas industry, crowding out domestic investment in other sectors. The negative relationship between aggregate FDI and non-oil GDP growth is an indication that oil-based investments may be overshadowing non-oil investments or creating little domestic value.
• Micro, Small and Medium Enterprises (MSMEs) and Small and Medium Enterprises (SMEs) are critical players in addressing the identified gap. As drivers of innovation, sustainable economic growth and adaptive capacity, they have the power to open growth pathways in tourism, digital services and green finance.
• Guyana is leveraging its participation in multiple regional (like CARIFORUM-EU EPA and CARICOM) and bilateral trade agreements to enhance its international services sector, aiming for greater market access and professional mobility (Mode 4), while also exploring innovative strategies like niche heritage/eco-tourism and a regional 'Caribbean Tourism Initiative' to diversify its economy beyond the oil and gas sector.

(Source: Barbados Today)