Macroeconomics Guyana -- Inflation Rate Inflation Rate

Macroeconomics Guyana -- Inflation Rate Inflation rate is an important concern to assess the economic condition of any country. This report focuses on the inflation rate of the South American country, Guyana. The economy of Guyana mainly depends upon the production of rice, sugar, shrimp, fresh fruits, vegetables and fish. The important industries of Guyana include mining of diamond, gold and bauxite, manufacturing of pharmaceuticals, footwear, clothing, beverage and foodstuff processing. In Guyana, inflation rate is measured through consumer price index.

It is normally used by the Government, international organizations and public members and trade unions to assess the ratio of increase in prices or inflation. Data is collected monthly however it is published quarterly. Since consumer price index measures the changes in prices of the consumer goods and services i.e. fixed basket of goods but not include capital goods.

There are 9 main categories of fixed basket of goods which includes commodities and services like Food, Clothing, Housing (electricity, fuel and water), Transport and communication, Education and Recreation services and medical services and so on. These 9 categories include 217 items. The prices of consumer goods and services are recorded at retail level that includes taxes as well. Relative weights are assigned to each item of the basket of goods. These weights are assigned on the basis of percentage of expenditure. Like the food items are given the highest rank that is 44.1.

Housing that includes the basic items of living like fuel, water and electricity is given the second highest priority that is 22.765 and transport and communication at third with weight 10.8, Furniture or logs weight of 6% and so on. (Measuring Inflation in Guyana, 2007) According to the annual report of 2010, an increase in the prices of the food items has been noticed because of the decrease in the production and supply.

Since, Guyana remained in the circle of extreme weather in the first half of the year 2010 so it adversely affected the crops, poultry and farms. Eggs, fish, meat, spices, vegetables and pulse products prices were raised up to 10.4%. However, the weather was suitable for the rice crops during the second half so it increased the production of rice and so the exports were observed higher than the last year. But the overall export of products was lower than in 2009.

The agriculture, fishing and forestry sector observed 0.5% increase in 2010 with respect to 2009. Though the production of sugar was quiet low about 5.5% and 7.6% in 1st and 2nd quarter of year but increase in rice production compensated the agriculture sector. An increase in the fishing sector of 7.4% was observed whereas there was decrease of 26.4% in poultry eggs. Furniture rate declined by 0.8% due to decrease in output of plywood.

Similarly, the increase in prices of medical, education, transport and communication were also observed by 1.4%, 2% and 4.8% because of the investment in retail & wholesale industries, information communication and transport storage growth that experienced 10.2% growth. However, the housing category experienced a decline by 0.3% due to low taxes on imports and exports after the world recession period in 2009-2010. Though, the country exports also earned low profits because of low interests and taxes.

(Annual Report 2010, 2010) According to the statistics of CIA, Guyana is currently ranked at position 67 in comparison with the other countries of the world in inflation. The overall annual percentage change in the CPI of 2010 with respect to 2009 was recorded as 2.2%. (Central Intelligence Agency, 2011) The inflation in Guyana is still in stable condition, if compared with the last few years trend. In 2007, the inflation rate was drastically raised up to 14%. After that year, the inflation was controlled at 6.4% in 2008 and in 2009 it was even more declined at 3.6%. (U.S.

Department of State, 2011) According to the quarterly report of Bank of Guyana 2011, inflation has increased by 1.7% as compared to the last period that was 0.5%. This is mainly because of food and fuel higher prices. Secondly this year too, the agricultural sector was unable to produce enough due to extreme weather conditions. A decrease in the output of rice, sugar and forestry sectors 21.3%, 27.1% and 40.1% has been observed. However the poultry sector gained growth in the first quarter of year 2011. Eggs output is increased up to 82.9%. Manufacturing and services sector remained stable.

Gold output was good enough but bauxite and diamond did not come up to the expectations. By the end of.