–On basic macro-economic framework

Over the past few days, opposition Members of Parliament have argued that Guyana’s reported economic growth is merely the result of increased government spending.

President Dr Mohamed Irfaan Ali has dismissed this claim as not only incorrect, but “comical.”

The President said the comments highlight what he described as the opposition’s weak understanding of basic macroeconomic principles. While noting that the opposition will continue to advance its political narrative, he emphasized the importance of citizens understanding and appreciating the economic realities.

In this context, the President went on to provide an overview of fundamental macroeconomic concepts to explain the drivers of economic growth.

“GDP measures production, not payment. If non-oil GDP is growing it is because businesses are producing more, not because government is spending more. It is because productivity is increasing,” he said during a recent live broadcast.

Building on his explanation of GDP growth, the President highlighted the fact that government spending cannot therefore be used to artificially inflate non-oil GDP, as the opposition is claiming.

He says the issue is not whether government spending has increased, but whether that spending is translating into productivity. The President affirmed that it is and went on to outline evidence to support his position.

“Take for example, our investment in hinterland roads. How are the miners going to be facilitated – the foresters going to be facilitated, if we don’t carry out these capital expenditures that lead to increased productivity, increased production, more jobs created investments and expansion of the economy,” the president reiterated.

Turning to capital expenditure, President Ali explained that this is intended to support structural changes in the economy to increase productivity while current expenditure serves to ease short term pressures by supporting for instance, farmers and children, among others.

The president reiterated that government expenditure is a key factor in driving growth but is not itself counted as actual growth.