The World's Fastest Growing Economy? Spoiler alert - it's in Latin America.

Guyana, a small South American nation often overshadowed by its larger neighbours, has emerged as the world’s fastest-growing economy. Over the past 12 months, the country’s economic trajectory has been nothing short of extraordinary, with an estimated GDP growth of 26.6% in 2024. This growth stems largely from the exploitation of massive offshore oil reserves discovered in 2015, transforming Guyana into an economic powerhouse in less than a decade.

This blog delves into the key drivers of Guyana’s rapid economic rise, its impact on the country and its people, and the challenges it faces in maintaining sustainable growth.

The Oil Boom: Catalyst for Change

Discovery of Oil Reserves

In 2015, ExxonMobil and its partners announced the discovery of vast oil reserves in the Stabroek Block, approximately 120 miles off Guyana’s coast. Subsequent discoveries increased the estimated recoverable reserves to over 11 billion barrels of oil equivalent, catapulting Guyana into the ranks of major oil-producing nations.

By 2020, production began at the Liza Phase 1 project, with the Liza Destiny floating production storage and offloading (FPSO) vessel operational. Since then, additional projects such as Liza Phase 2 and Payara have come online, further increasing production capacity. As of 2024, Guyana produces approximately 400,000 barrels of oil per day (bpd), with plans to surpass 1 million bpd by 2027 .

Revenue Windfall

Oil revenue has been the primary driver of Guyana’s GDP growth. In 2023, the government earned nearly $1.5 billion in oil royalties and taxes, and this figure is expected to grow significantly in 2024. Guyana’s sovereign wealth fund, established to manage oil earnings, has grown rapidly, providing resources for long-term investments in infrastructure, education, and healthcare .

Economic Diversification Efforts

While oil dominates the narrative, Guyana is actively investing in other sectors to reduce dependency on hydrocarbons.

Infrastructure Development

The government has allocated significant oil revenues to modernize Guyana’s infrastructure. Projects include upgrading the transportation network, constructing bridges like the new Demerara River Bridge, and improving port facilities to support trade.

Agriculture and Renewable Energy

Guyana aims to revive its traditional sectors, such as rice and sugar, while promoting renewable energy projects. Hydropower and solar energy initiatives are gaining traction, in line with the country’s low-carbon development strategy.

Tourism Potential

With its pristine rainforests, rich biodiversity, and cultural heritage, Guyana is positioning itself as an ecotourism destination. Increased investment in hospitality and conservation efforts seeks to attract international visitors .

Socioeconomic Transformation

Rising Incomes: Economic growth has led to rising incomes for many Guyanese. Per capita income is expected to more than double by 2025, improving living standards and reducing poverty rates.

Job Creation: The oil sector and related industries have created thousands of jobs, particularly in construction, logistics, and services. Training programs and scholarships funded by oil revenues are helping locals acquire skills for high-paying roles in the energy sector.

Urban Development: Georgetown, the capital city, is experiencing rapid urbanization, with new residential, commercial, and industrial projects reshaping the skyline. Improved infrastructure has enhanced access to education, healthcare, and other essential services.

Challenges Ahead

Managing Oil Wealth

The sudden influx of oil wealth poses challenges, including the risk of economic mismanagement and corruption. Guyana must ensure transparent governance of its sovereign wealth fund and equitable distribution of resources to avoid the so-called “resource curse.”

Environmental Concerns

Oil exploration raises concerns about environmental degradation and the country’s vulnerability to climate change. As a low-lying nation, Guyana faces risks from rising sea levels and extreme weather events, underscoring the need for sustainable development practices.

Economic Inequality

While many Guyanese are benefiting from economic growth, disparities remain. Efforts are needed to ensure that rural areas and marginalized communities share in the prosperity.

Geopolitical Tensions

Guyana’s territorial dispute with Venezuela over the Essequibo region adds a layer of geopolitical complexity. The ongoing arbitration at the International Court of Justice (ICJ) could have significant implications for the country’s stability and access to oil reserves.

Lessons from Guyana’s Success

Guyana’s remarkable growth story offers valuable lessons for other developing nations:

1. Strategic Resource Management: Establishing a sovereign wealth fund with clear rules for spending and saving ensures long-term benefits from resource wealth.

2. Global Partnerships: Collaborating with international companies like ExxonMobil has brought technology, expertise, and investment to Guyana.

3. Diversification: Investing in non-oil sectors, such as agriculture and tourism, reduces reliance on volatile oil markets.

4. Inclusive Growth: Prioritizing social programs and infrastructure development ensures broader participation in economic gains.

Conclusion: A Promising Future

Guyana’s extraordinary economic growth in the past 12 months is a testament to the transformative power of natural resource wealth when managed effectively. The country stands at a critical juncture, with the opportunity to build a prosperous, inclusive, and sustainable future.

By addressing challenges and maintaining a focus on diversification and governance, Guyana can cement its position as a model for resource-rich developing nations. Its success story will undoubtedly continue to capture the world’s attention in the years to come.