2. Reduction in Supply of Intermediate Inputs

Production across countries has also become more integrated due to increased trade in parts and components, as firms outsource as a cost-lowering strategy. Therefore, another short-term effect of the spread of the coronavirus is the potential shortage of intermediate goods and raw materials due to supply disruptions in global production and supply chains, first starting with China but expanding as the virus spreads. Oxford Economics 6 predicts that global industrial production will contract by 2% for 2020. UNCTAD 7 also predicts that China’s supply of intermediate goods will reduce by 2% for 2020. Further, the National Bureau of Statistics of China has revealed that industrial production in China contracted by 13.5% between January and February, 2020. (See figure below).

Approximately 20% of global trade in intermediate inputs for manufacturing originates from China. This can result in imported inflation as reduced supply is likely to lead to price increases, resulting in an increase in the cost of production for Guyanese firms, with other spillover effects on workers and consumers.

This is of far greater concern than the impact on final consumer goods because approximately 78% of Guyana’s imports are intermediate consumption goods, that is, goods that are inputs into the production of other goods for domestic consumption and exports. If those intermediate goods are not available or prices are too high because of a shortage in supply, then production in Guyana will suffer with the attendant consequences of job loss and income loss. That is in addition to the physical disruption of local production as a result of the need to lockdown the country to protect people and workers from spreading the virus.

The extent of the impact of reduced supply of intermediate inputs on Guyanese firms however, is dependent on how reliant they are on inputs from China and other countries more hard-hit by the virus. According to Baldwin and Tomiura (2020) 8 the hardest hit countries (China, USA, Spain, Italy, United Kingdom, Brazil) account for the majority of Global GDP, manufacturing and exports. Some of the countries, including China, the US and Canada are important trading partners of Guyana both as destination markets for final goods and as import markets for intermediate inputs and raw materials. (See table below). Collectively, with the inclusion of CARICOM, they account for over 70 percent of our GDP. The extent to which the global crisis hits those countries will cause the crisis to have an impact on our production (through contagion effects). Experts

6 OxfordEconomics. Coronavirus Watch. Understand the Economic Impact of the Coronavirus. April 2020. Viewed at; http://blog.oxfordeconomics.com/coronavirus 7 UNCTAD. 2020. Global Trade Impact of the Coronavirus (COVID-19) epidemic. Viewed at; https://unctad.org/en/PublicationsLibrary/ditcinf2020d1.pdf 8 Baldwin, Richard and Eiichi Tomiura. Economics in the time of COVID-19. VOX CEPR Policy Portal. Viewed at; https://voxeu.org/content/economics-time-covid-19

suggest that the economic impact (a great decline in GDP) could range from 2.1% in Japan to 9% in the EU. The US can decline as much as 5.9%.

Table 6: Countries around the world with the highest number of cases.

Countries Number of Confirmed cases as at, April 21, 2020 United States of America 751,273 Spain 200,210 Italy 181,228 Germany 143,457 France 113,513 United Kingdom 124,747 China 84,253 Source: World Health Organization

The tables below show Guyana’s imports from China, USA, United Kingdom and Canada. The tables confirm that these are key markets for intermediate inputs. In 2018, Guyana’s leading imports from China was US$30,086 (000) worth of electrical machinery and equipment and parts thereof, followed by uS$26,788 (000) worth of machinery, mechanical appliances, nuclear reactors, boilers; parts thereof.

Table 7: Guyana’ Imports from China

Product code Product Line Value in 2018. US Thousand dollars 'TOTAL All products 219,933

'85 Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television ... 30,086 '84 Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof 26,788 '87 Vehicles other than railway or tramway rolling stock, and parts and accessories thereof 25,550 '39 Plastics and articles thereof 13,205 '73 Articles of iron or steel 13,147 '93 Arms and ammunition; parts and accessories thereof 12,749 '40 Rubber and articles thereof 7,935 '94 Furniture; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings; ... 7,026 '89 Ships, boats and floating structures 6,125 '72 Iron and steel 6,120 '62 Articles of apparel and clothing accessories, not knitted or crocheted 5,607 Sources: ITC calculations based on UN COMTRADE statistics.

Product Code

'TOTAL

'87

'84

'85

'40 '30 '73 '49

'39 '90

'18

Table 8: Guyana’s Imports from United Kingdom

Product Line Value in 2018, US Thousand Dollars All products 35,091

Vehicles other than railway or tramway rolling stock, and parts and accessories thereof 10,009 Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof 7,941 Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television ... 3,034 Rubber and articles thereof 1129 Pharmaceutical products 962 Articles of iron or steel 947 Printed books, newspapers, pictures and other products of the printing industry; manuscripts, ... 861 Plastics and articles thereof 835 Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical

...

816

Cocoa and cocoa preparations 720 Sources: ITC calculations based on UN COMTRADE statistics.

Product Code

'TOTAL '89 '38 '84

'88 '27

'85

'73 '10 '87

'39

Table 9: Guyana’s Imports from the United States

Product Line Value in 2018, US Thousand Dollars

All products 2,279,541 Ships, boats and floating structures 1,525,296 Miscellaneous chemical products 139,496 Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof 125,321 Aircraft, spacecraft, and parts thereof 64,079 Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral ... 58,365 Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television

...

49,616 Articles of iron or steel 33,931 Cereals 23,544 Vehicles other than railway or tramway rolling stock, and parts and accessories thereof 21,460 Plastics and articles thereof 20,761 Sources: ITC calculations based on UN COMTRADE statistics.

Product Code 'TOTAL

'84

'10 '85

'88 '73 '87

'39 '48

'07 '82

Table 10: Guyana’s Imports from Canada

Product Line Value in 2018, US thousand Dollars All products 34,160

Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof 9,805 Cereals 4,793 Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television

...

2,968 Aircraft, spacecraft, and parts thereof 1,766 Articles of iron or steel 1,699 Vehicles other than railway or tramway rolling stock, and parts and accessories thereof 1,357 Plastics and articles thereof 1,191 Paper and paperboard; articles of paper pulp, of paper or of paperboard 1,002 Edible vegetables and certain roots and tubers 965 Tools, implements, cutlery, spoons and forks, of base metal; parts thereof of base metal 887 Sources: ITC calculations based on UN COMTRADE statistics.

3. Reduced Access by Guyanese to Key Consumer Goods and Health Supplies

Following the immediate announcement of the virus assuming the status of a global pandemic, and Guyana registering it first death, there was an almost immediate escalation of prices of critical sanitation and health goods by some local retailers and distributors, partially driven by expectations of shortages due to ‘panic’ buying. This perception soon became reality consequent to prohibitions on the exportation of protective medical equipment and supplies such as ventilators, surgical/disposable masks, raw textiles for masks and coveralls and sanitizers, imposed by countries such as India, Indonesia, Thailand, the United States of America and Germany in a bid to hoard goods for domestic supply.

Export restrictions have extended to the food market. In response to ‘panic’ buying by consumers, countries have sought to stockpile food items by restricting exports. Noteworthy are Russia for wheat, Vietnam for Rice and Thailand for eggs. This will lead to higher prices and shortages for countries that rely on exports from these markets. Fortunately, none of these countries are important trading partners of Guyana for those products. However, if the effect is an increase in global prices for grains, as alluded to by the financial times 9 , this may be to the advantage of rice exports from Guyana.

Apart from export restrictions, the increase in domestic demand for key consumer commodities in foreign markets and resulting export pessimism, is also an avenue through which Guyanese will be affected. On the one hand, it may lead to a shortage and higher prices for key food items sourced from foreign markets. For Guyana, potatoes, onions and garlic are key import commodities that form part of the average family’s food basket.

Motor vehicles is also a key import commodity of Guyana which may exhibit price increases. UNCTAD 10 has predicted that automotive will be one of the top three industries that will experience reduced investment. The Institute for Economic Research (IFO) has also pointed to plummeting demand globally in addition to production cuts Germany, a leading auto manufacturer. (See figure).

On the flip side, increased demand in foreign markets may also be to the advantage of Guyanese exporters of products such as rice, sugar, fish and condiments.

9 Countries follow consumers in stockpiling food | Financial Times. April 5, 2020. Viewed at https://www.ft.com/content/5c8cbc60-aec0-4f3d-b0e2-a5e44f0c6f74 10 UNCTAD. 2020. Global Trade Impact of the Coronavirus (COVID-19) epidemic. Viewed at; https://unctad.org/en/PublicationsLibrary/ditcinf2020d1.pdf