South America Online

–Economist says not against reopening of country, but advises against trading lives for profits

REVERSING the effects of the dreaded novel coronavirus (COVID-19) pandemic on the local economy would not happen immediately, but, with a coordinated approach which places emphasis on the service sector, recovery would be faster here than in other countries.

Guyana, like many countries around the world, has been severely affected by the direct and indirect effects of this pandemic. And, the main constraining factor has been the necessary control measures which were instituted by the government to mitigate the spread of this scourge.

In March, 2020, when the COVID-19 pandemic reached the shores of Guyana, the country was forced to adopt measures to protect its people and simultaneously maintain economic stability. The situation was further exacerbated by a protracted General and Regional Elections, which ended on August 2, 2020.
Faced with a pandemic and political tension, the country’s economy was threatened, as commercial and economic activities had “dried up,” leaving the country to “ride on the back” of its nascent oil-and- gas sector, which only kept the country’s Gross Domestic Product (GDP) above the international average and did not provide actual relief to the nation.

Vice-President Dr. Bharrat Jagdeo, at a pre-budget press conference in August, said that Guyana’s oil economy grew by 45.9 per cent, but the non-oil economy, which comprises the traditional labour-intensive sectors, shrunk by 4.9 per cent in the first half of the year.
And, although the International Monetary Fund (IMF) has projected that Guyana will be the only country in the Caribbean and Latin America to have positive real GDP growth, pegged at 26.2 per cent, Head of the Department of Economics at the University of Guyana, Sydney Armstrong, has said that certain key sectors will have to be re-organised and placed on the front burner so that there could be tangible recovery.

Critical in the road to recovery, as outlined by Armstrong, will be the service sector, which was severely rattled by the effects of COVID-19.
According to Investopedia, the service sector produces intangible goods, more precisely, services instead of goods and it comprises various service industries, including warehousing and transportation services; information services; securities and other investment services; professional services; waste management; health care and social assistance; and arts, entertainment, and recreation.

Countries with economies centred on the service sector are considered more advanced than industrial or agricultural economies.

SEVERE HIT
The service sector in Guyana accounts for more than half of the GDP, but it has taken a severe hit.
“The service sector has been hit the hardest…but, as we recover, it must be the sector of focus…we have to organise and plan how to re-open the economy with this [service sector] in mind…there is the tourism industry and there are other industries within the service sector, like banking and transportation which need to be priority,” said Armstrong.
The government has already taken steps to rejuvenate ailing sectors and restore stability, but has maintained focus on safeguarding the health of every Guyanese through various control measures.

Among some of the resuscitative measures are the reopening of the country’s international airports; the reduction in the hours of the national curfew; extension in the time for businesses to operate; and the authorisation for businesses to operate in a safe manner, although at half of its regular capacity, in some cases.
But, like Armstrong, Bruno Antunes, an economist at the United Nations Conference on Trade and Development (UNCTAD), was reported as saying that a strong and better economic recovery from the COVID-19 pandemic requires governments to make the services sector a key element in their policy mix.

Services play a key role in increasing productivity, efficiency and effectiveness in the whole economy, said the economist.
Globally, services represent two-thirds of economic output, more than half of the world’s jobs and about a quarter of direct exports. But direct exports of services are just the tip of the iceberg; services provide significant inputs to all economic sectors.
As countries reel under the pandemic’s economic impact, the services sector can help turn the tide by creating opportunities for greater income, food security, productivity, employment, investment and trade, said Antunes.

Investments in the service sector will, however, have to be supplemented by placing similar emphasis on manufacturing.
“In terms of manufacturing, even before the pandemic, has been a very low-performing sector in Guyana, in terms of GDP, so it is something we must think about because value-added is the way we should go,” said Armstrong, adding that this will be supplemented by investments in agriculture.
Already, the government has pumped $5 billion into the sugar industry, but Armstrong said there are other sub-sectors such as fisheries, livestock, forestry and rice which must be considered as well.

“We have to ensure that emphasis is placed on the people operating in such sectors…they need equipment to guard against COVID-19 and affordable equipment to conduct their work,” said the economist.
The government, in presenting budget 2020, had announced removal of the value added tax (VAT) on agricultural and other machinery, and had also made the poultry industry zero-rated, among other things.

The comparatively exorbitant cost of electricity has also been a deterring factor for investors, but authorities have promised to reduce this cost by at least 50 per cent within the next five years.
The resuscitative measures, supplemented by promises to create a business-friendly environment, have already attracted investors and instilled some level of confidence in stakeholders. Local businesses have also been responding well to those resuscitative measures, and, they are now reorganising themselves to “bounce back.”

DO NOT TRADE LIVES
Armstrong, however, cautioned that while measures to reinvigorate the economy are great, the authorities must be cognisant that lives cannot be traded for profits.
“I am with reopening of the economy, but the reopening has to be done in a structured way, it must be done in a well-planned manner and well-organised way…we still have a large amount of persons affected by the coronavirus, so reopening the economy, if not done in a structured way, can spell disaster.

“While the drive is to ensure that you have economic growth and the economy rebounds, we cannot and must not trade lives for economic prosperity,” said Armstrong.
Armstrong advised that emphasis must be placed on testing persons and ensuring that contact tracing is done to mitigate the spread of COVID-19. Local authorities have so far tested 29,752 persons, with 24,376 negative and 5,376 positive.

“What is key is the dissemination of data from the government to the people…we need to know their plan, how they will do it and what is expected,” said the economist.
While the government has to do its part, he acknowledged that civilians have a critical role to play in protecting themselves and, by extension, safeguarding the economy.