Guyana

The boom in the oil sector, the driving force behind durably stellar growth

The economy continued to perform strongly in 2024, with growth well ahead of neighbouring countries thanks to increased production in the oil sector. The major oil discoveries in the Stabroek Block, exploited by the consortium of ExxonMobil, Hess and CNOOC, have given the country the third-largest commercially exploitable oil reserves in Latin America and the Caribbean, with estimated capacity of 11 billion barrels. With offshore development already under way (two fields in production, Liza-1 from 2021 and Liza-2 from 2022), daily production quadrupled between 2021 and 2023 and continued to rise sharply in 2024 thanks to the start of production at the Payara field, which produced 613,000 barrels per day in Q1 2024 (+59% YoY).

Looking ahead to 2025, net exports are expected to remain the largest contributor to strong GDP growth, fuelled by further expansion in the oil sector. The Yellowtail development project, also located in the Stabroek Block, should start in 2025 with an estimated investment of USD 10 billion, pushing up production and export. However, the pace of economic growth should slow as oil prices are expected to be lower than in 2024 amid oversupply risks (an average price of approximately USD 70-75/bbl in 2025). Despite continued sluggish global demand for hydrocarbons, international oil majors should continue to invest in upstream exploration given the early success of current operations and the significant offshore potential in Guyana. In this regard, ExxonMobil reported a new discovery at the Bluefin well in the Stabroek block in March 2024 and exploration efforts are expected to continue in the short term.

Meanwhile, non-oil activities, particularly construction and services (such as accommodation, food, transport) will be boosted by the oil sector's trickle-down effect on the local economy. The economy will also benefit from the robust momentum of the gold sector (gold accounted for 6% of exports in 2023).

Public and external accounts bolstered by oil windfall

The oil sector, supported by rising production, will provide solid revenues to the government (40% of total revenues, equivalent to 5% of GDP) mostly through withdrawals from the National Resource Fund (NRF). The market value of the NRF, bolstered by oil profit and royalties, totalled USD 2.9 billion at the end of June 2024. Revenues will be boosted by the ongoing negotiation of value-added sharing between the operating companies and the government for future contracts as part of the attribution of 14 oil blocks. Furthermore, expenditure will remain high as the Guyanese government invests heavily in infrastructure to strengthen both the oil value chain and local communities, increases spending in social sectors such as schools, hospitals, and housing, public sector salaries and measures to assist households with cost-of-living pressures. Tax revenues do not balance these expenses. The resulting deficit is financed through borrowing which does not translate into a higher debt-to-GDP ratio, thanks to the excellent GDP growth rate.

The current account will again show a very large surplus, mainly due to the positive trade balance where rising oil exports will far outweigh the increase in imports of capital goods needed for oil and mining operations. The trade balance will also continue to benefit from large gold exports. However, the trade surplus is expected to narrow slightly in 2025 due to expectations of lower oil prices. The trade surplus will continue to more than offset deficits in services and income related to the activities of foreign oil companies, as well as to tourism and transport.

Despite recurrent high current account surpluses, foreign exchange reserves have remained relatively low at an estimated 1.1 months of imports as of March 2024, distorted by oil receipts deposits in National Resource Fund and cost recovery by oil operators for capital imports required for oil exploration and production, such as new floating platforms. In addition, reserves are under pressure from growing deficits in the services and primary income balances. While the former is expected to widen due to higher payments for construction and services related to oil sector operations, the latter is set to widen as foreign oil companies repatriate profits from their local operations. In response to persistent complaints from local commercial banks about foreign exchange shortages, the Government of Guyana requested intervention from the Bank of Guyana (BoG) in June 2024. This resulted in the release of over USD 80 million into the monetary system to address the immediate shortage. Despite the government's intervention, businesses in Guyana have continued to face delays in accessing foreign exchange in 2024. Looking ahead, the significant increase in oil production and associated export earnings should provide the necessary foreign exchange inflows to support a gradual accumulation of reserves.

External security risks to remain elevated

In December 2023, Venezuela held a referendum in which voters supported the annexation of Guyana's Essequibo region, reviving a territorial dispute dating back to an 1899 arbitration ruling. Acting in response to the referendum, the government introduced legislation to make the Essequibo a Venezuelan state, which was passed by the Venezuelan parliament in March 2024, and has conducted major military exercises on the border. The Guyanese government has rejected Venezuela's claims and has been backed by the UK and US governments. Venezuelan President Maduro stepped up his rhetoric on the Essequibo dispute in the first half of 2024 in an attempt to shore up public support ahead of the forthcoming elections. In July 2024, Maduro was declared the winner of a contested presidential election amid allegations of fraud by the opposition and international observers. Although the dispute over the Essequibo region has been overshadowed by Maduro's recent efforts to legitimise his victory with the electorate and the international community, the issue is unlikely to fade as raising the Essequibo issue is an easy way for Maduro to divert attention from the country's economic turmoil.

As leader of the party that won the majority of votes in the legislative election, Irfaan Ali of the centre-left People's Progressive Party/Civic (PPP/C) became President in August 2020. After a few months of political turmoil, he succeeded David Granger, who had headed a multi-ethnic coalition since 2015 composed of APNU (A Partnership for National Unity), dominated by the People's National Congress or PNC, and its fledging ally, AFC (Alliance for Change). The political environment in Guyana has historically been characterised by racial and ethnic divisions which often influence electoral preferences and political alliances. While the Indo-Guyanese community (40% of the population) largely supports the PPP, the Afro-Guyanese population (30%) favours the PNC due to historical tensions between the two parties. Ali's party has 33 seats in Parliament, giving it a slim majority in the 65-seat National Assembly (the APNU-AFC coalition has 31 seats). Local government elections, initially scheduled for 2020 and finally held in June 2023, strengthened the PPP's hold on power, including in regions historically dominated by opposition parties: the party was elected in 67 of the 80 contested regions. Moreover, recent developments in the border dispute have boosted the President's popularity (69% in November 2023, according to NACTA) as Ali's diplomatic approach has been well received by the electorate. Last, favourable economic conditions should support improved political stability in the short term as the government is expected to continue using oil revenues to increase spending. In this context, polls suggest a relatively comfortable victory for Ali's PPP in the December 2025 general elections.

Last updated: October 2024