(Trinidad Express) After three years of slump, Trinidad and Tobago’s economy is not recovering, and crime and labour unrest are making matters worse.
The Central Bank sounded such warnings yesterday, as it revised its economic growth forecast for 2012 down from 1.5 per cent to just one per cent.
The bank also expects headline inflation, now at 9.2 per cent, to be seven to eight per cent this year.
It expressed concern that lack of adequate data may be masking the country’s real unemployment rate which, based on 2011 data, stands at 5.2 per cent.
The economic growth revision, says Central Bank Governor Ewart Williams, comes with three main downside risks: contagion from the Eurozone through trade and remittances; prolonged and antagonistic industrial relations; and crime.
Combined, all three factors could worsen the downward growth projection.
“Trinidad and Tobago’s economy has not done well in the past three years,” Williams said, “and we are waiting patiently for a recovery.”
This was after delivering the biannual Monetary Policy Report at the Central Bank, Port of Spain, yesterday.
Williams’s downward revision comes on the heels on the International Monetary Fund’s (IMF) projection that the economy is expected to grow some 1.7 per cent for 2012.
“Data for the first quarter of 2012 do not yet validate this optimism, as a further, albeit small, decline in real GDP may have occurred,” he said.
The economy, Williams said, is not growing as envisaged, noting contraction by 2.6 per cent in the third and fourth quarters of 2011.
Williams had earlier noted that the United Kingdom is in technical recession because of two quarters of economic decline.
Is T&T also in recession, he was asked.
Williams refused to use the “R” word.
“I am not sure you can translate these concepts mechanically from developed to developing countries. Our situation is more serious. We’ve had negative growth for three years. That’s the issue. It’s not so much the quarterly variation. We’ve had negative growth for three years. That’s our challenge: how do we get out of that slump,” he explained.
Is “slump” the same as recession, the Governor was asked. Once again, he refused to make a definitive statement.
“You want me to say the ‘R’ word? The economy has been in a slump. We are waiting on the recovery and the recovery is a bit delayed. Let’s put it like that,” he said.
The “steeper” than anticipated drop in the energy sector, he said, had a lot to do with bank’s revision.
For instance:
• Oil Production: now 80,673 barrels a day; an 18 per cent decline from 2010;
• LNG output down 16.5 per cent; natural gas liquids declined by 16.1 per cent;
In the non-energy sector, Williams noted that output of the construction and manufacturing sectors was negatively impacted by industrial action at Trinidad Cement Ltd (TCL), which significantly reduced output and sale of cement in the quarter.
While the onus has remained on the Government to stimulate the flagging economy, Williams noted that its fiscal plans, through its Public Sector Investment Programme (PSIP), have not provided the stimulus to economic activity.
Fiscal operations, to date, have produced a surplus of $2.8 billion compared with a deficit of $207 million for the corresponding period last year.
Despite the PSIP stimulus, what’s exacerbated the growth is the lack of response by the private sector to heed the Government’s call to invest.
“Private sector representatives acknowledge that there are several government initiatives geared to promoting new business investment. They concede, however, that the turnaround in business is taking longer than expected because many businesses are still taking a wait-and-see attitude, given weak export demand from the region and concerns about the security and industrial relations environment,” he said.
Questioned on what he thought was a reasonable ceiling for wage settlements, Williams responded: “I believe in the collective bargaining process but we have not been able to find a way to link wage settlements to productivity. I don’t know whether five is the right number, six, seven, eight, nine, ten,11 or 12 per cent.
“What I know is that the indicators that I see are suggesting that productivity levels are coming down. If productivity levels continue to come down, we need to be careful about the level of our wage settlement.”
Planning Minister Dr Bhoendradatt Tewarie acknowledged yesterday that there were some issues with the PSIP.
He said that the Government is reviewing the second-quarter implementation to make recommendations for re-allocation of funds away from non-yielding projects to projects which can be implemented.
This matter, he said, was still before the Cabinet.
