T&T Chamber cautious on IMF growth forecast

(Trinidad & Tobago Guardian): The T&T Chamber is maintaining a cautious stance on the International Monetary Fund’s (IMF) projection that T&T’s economy is entering a phase of slow economic recovery.

Commenting on the concluding statements from the IMF’s recent Article IV Mission to this country, the Chamber said feedback from the business community shows that there has not yet been any material improvement in consumer demand. It also cited the IMF’s observation of key risks that “may continue to weaken market confidence, not the least of which is energy price volatility.”

The Chamber said in a statement: “July 11, 2018, saw one of the steepest one-day oil price declines in a year; while this may not be sustained, it highlights the risks we face as an energy dependent economy.

“It also emphasises the need to insulate our economy from future shocks, and to intensify efforts to address the barriers to non-energy growth.”

The group also highlighted its call for a national transformation strategy in which the private sector can play a part.

According to the Chamber, the IMF identified risks T&T must address to continue the drive to “transform the economy, improve competitiveness and reduce reliance on the energy sector.”

It said: “We therefore concur with the call for the speedy approval of the Revenue Authority legislation, as well as the acceleration of VAT refund payments. We are also keen to see the updated figures and charts on the status of VAT refunds, as was done in the last report, and reiterate the need for more active management of the foreign exchange market to ensure equilibrium between supply and demand.

“As far as the proposed increase in utility tariff rates goes, while the T&T Chamber recognises the importance of reducing subsidies, it is equally important to improve efficiency and ensure that services provided by the government are competitive. Urgent action is needed to reduce labour rigidities in the public sector and to improve the efficient delivery of public services, which ultimately requires meaningful public sector reform.”

Noting that the IMF had welcomed National Insurance Service (NIS) reform initiatives such as further contribution rate increases, the Chamber said these cannot be the only solutions.

“Unfortunately, decisions made in previous administrations have increased the pension subsidy paid, which has further exacerbated the problem. The increased cost to both employees and employers will further contribute to making Trinidad and Tobago more uncompetitive in the global landscape.

“Corrective actions must be taken: Barbados, for instance, as at January 1, 2018, increased its retirement age to 67,” the Chamber said.

The business group said it agreed with the IMF’s observations and recommendations for structural reform to support sustainable growth.

“We also back any balanced approach to crime prevention and control. Finally, we maintain that large budget deficits cannot be maintained, and we endorse the recommendation to adopt a clearly communicated Medium Term Fiscal Policy Framework (MTFF),” the Chamber said.

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