The world’s fastest growing economy (2024)

BLOG Nov 22, 2023

Guyana registered the world's highest real GDP growth rate in2022, with its national output 62.4% higher. Driven by its boomingoil sector, the economy is set to expand by 27.2% in 2023 and 34.2%next year — consolidating the country as the world'sfastest-growing economy in 2024.

During 2010-15, Guyana was one of the lowest-income countriesglobally, with its economy based on the agricultural and miningsectors. Since 2015, the country's economic landscape has changeddrastically due to the discovery of oil. The share of thepetroleum, gas and support services sector increased from 0.2% ofGDP in 2015 to 57.3% in 2022, displacing the agricultural sector asGuyana's main economic driver.

Real GDP will continue growing in the mediumterm. With oil sector growth also likely to encourage theexpansion of non-oil sectors, particularly infrastructure andservices throughout Guyana, S&P Global Market Intelligenceprojects that Guyana's real GDP will expand by 21.7% yearly onaverage during 2024-28.

Guyana's real GDP per capita is expected to improveconsiderably over the medium term. Due to the impressivegrowth in oil output, Guyanese real GDP per capita increased toUS$12,207 in 2022 from US$4,265 in 2018. Market Intelligenceanalysts project that rapid growth will continue over the mediumterm, projecting that per capita income will increase by 20.9% onaverage throughout 2023-2028, to reach slightly below US$38,000 by2028. We forecast that there will be ample opportunity forinvestment in the non-energy sector, boosted by the government'sinfrastructure development plans and wider multiplier impactsextending to the services sector.

The current expansionary fiscal policy stance will continue tobe financed mainly by oil revenue. The government of Guyana isexpecting to earn US$1.41 billion in profit from oil and US$225.20million from royalties in 2023. Market Intelligence estimates thatthe total assets of Guyana's Natural Resource Fund (NRF), thecountry's sovereign wealth fund, could reach about US$2.05 billionby the end of 2023, up 40.3% from the December 2022 level. Weanticipate that NRF inflows will represent on average US$5.5billion (14.7% of its GDP) on an annual basis throughout2023-28.

Withdrawals from the NRF into the domestic economy willexert substantial upward pressure on the Guyanese dollar.The government has made NRF withdrawals to cover current spending,with the government's expansionary stance increasing the risk ofoverheating in the domestic economy and temporary external paymentimbalances. Large NRF withdrawals would support significantexpansion in government spending, further elevating inflation risk,especially over the next 1 to 3 years, when spending increases willbe the largest relative to GDP. This could generate an expansion ofcredit and money supply that the local economy is unprepared toabsorb, potentially increasing inflation across many sectors.

Strong government stability and a weak opposition willfacilitate long-term planning and passage of legislation.The ruling PPP/C holds a majority sufficient to pass legislationand has improved its popularity, evidenced by PPP/C gains in theJune 2023 local election, including in opposition strongholds. Incontrast, the main opposition party, the People's National Congress(PNC), has lost mobilization power and support, exacerbated byinternal divisions.

Advancing and accelerating oil and gas sectordevelopment will remain the major focus of the government at leastuntil 2025. New legislation efforts have centered onmaximizing domestic benefits, but the regulatory environment islikely to remain fluid. New PSA terms, designed to maximize profitfrom the oil sector, were approved in March 2023. The new PSAs willbe implemented alongside the new Petroleum Law passed in August2023, which replaced the 1987 Petroleum Act.

Beyond the oil sector, the government will focus oninfrastructure and economic diversification, but reliance on loanswill increase vulnerability to oil price volatility.President Ali has set out an infrastructure plan includingcountrywide road network expansion and improvement, as well as 48bridge projects. Ali has also emphasized the need to diversify theeconomy beyond oil, with a particular focus on agriculture,healthcare, education, and electricity generation. Given limiteddomestic workforce capacity, the government has sought to developthese goals with international resources and is offering incentivesto investors outside the oil sector. Road improvement projects areunderway in multiple regions, while contracts have been signed withforeign companies for further projects, indicating that thedevelopment plan set out by the government is progressingfavorably.

Although hydrocarbon-led growth gives Guyana the fiscal space toacquire new debt, the reliance on loans for multiple large-scaleprojects is a negative indicator of the country's long-termeconomic sustainability. The repayment of loans will be reliant oncontinued oil revenue, while oil sector dependence and high levelsof long-term debt would increase the country's vulnerability to oilprice volatility.

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.