IDB Warns of Uncertainty Over Guyana's Economic Outlook Amid Geopolitical Tensions

The Inter-American Development Bank (IDB) has expressed uncertainty about Guyana's economic outlook due to persistent geopolitical tensions that continue to push up international oil prices.

Guyana, which transitioned to becoming a net oil exporter in 2019, still relies heavily on imported oil for 90% of its energy needs. As a result, electricity and fuel prices remain volatile channels through which the Guyanese economy can be negatively impacted.

The IDB notes that oil shocks can lead to Dutch disease risks, spurred on by an influx of oil revenues and excessive government spending. However, the IMF forecasts that Guyana's GDP growth expansion in 2026 will be smaller than originally predicted but with manageable macro-fiscal risks.

The Guyanese government is taking steps to mitigate the current oil price shock through measures such as maintaining a zero-rate tax on fuel, introducing a new universal cash grant, and maintaining electricity subsidies. These efforts are expected to result in a larger primary deficit than originally budgeted, but macro-fiscal risks are expected to remain largely contained due to Guyana's withdrawal rules and high concessionality of the debt portfolio.