2012: A Year of Minuses

I had to re-post this article in today's Newsday about our current economic woes. 2012, A year of minuses Thursday, December 27 2012

PRIVATE sector initiative continued to be weak throughout 2012, as evidenced by the monthly monetary reports of the Central Bank, thus increasing the need for public sector investment during a period when revenue was on the decline as a result of the ongoing international financial crisis. Despite Government’s hoped for 1.7 per cent growth of the economy in 2012, the latest edition of the authoritative Republic Bank’s Economic Newsletter has indicated instead that the Trinidad and Tobago economy was estimated to have contracted by one per cent in the third quarter.

In addition, the economy appears to have contracted overall for 2012. Although the Economic Commission for Latin America (ECLAC) claimed recently that TT was projected to achieve 2.5 per cent growth in 2013, Government should not be lulled into complacency and should push firmly ahead with diversification of the economy and realistic economic priorities and objectives and not get side-tracked by next year’s Tobago House of Assembly and Local Government elections.

Despite the ECLAC Report there is the distinct possibility of no growth or even a decline in the country’s economy in the upcoming year as a result of a potential decline in world prices of crude oil and natural gas, triggered by a contraction of Western European economies and that of the United States, TT’s largest export market. In turn, but while our foreign exchange reserves remained healthy in 2012 and represented more than a year of imports cover, ill-judged levels of Government’s borrowing and spending throughout the current year, and of which citizen-residents are aware, are reasons for concern.

With the accessing of the Minister of Finance portfolio by Larry Howai, following on the Cabinet reshuffle in June, there have been talks of plans by the People’s Partnership Administration to dispose of several of the country’s traditionally profitable assets, for example, the Petroleum Company of Trinidad and Tobago Limited (Petrotrin) and the First Citizens’ Bank (FCB). Additionally, there have been rumours of a reduction in the decades old fuel subsidy.

Hovering over all of the minuses throughout 2012 has been the ever present possibility of a decline in the real Gross Domestic Product (GDP). An issue which has been one of the dominating factors of 2012 has been Government’s almost unflinching resolve not to reveal both the full extent of its borrowing from Corporacion Andina de Fomento (CAF) and the terms and conditions of its multi-billion dollar loan from CAF.

Of additional concern is that while most other countries have reduced their levels of expenditure following on the fall off in revenue attributable to the ongoing financial crisis, TT’s budgeted expenditure for the current fiscal year has risen and continues to rise. Estimated expenditure for the 2012/2013 financial year is the highest ever for TT. Levels of Government borrowing and spending, which defy logic, are also reasons for concern.

There had been more than hint earlier this year by former Finance Minister, Winston Dookeran, of a separation of the long established Heritage and Stabilisation Fund. Although 2012 has witnessed a continued decline in reserves of natural gas, nevertheless there has been no need to panic as the 2012 Ryder Report natural gas audit for TT, presented in August, demonstrated that the country has 13.3 trillion cubic feet (tcf) of proven gas reserves, 6.03 trillion cubic feet of probable gas reserves and 30.83 tcf of exploration reserves.

Former Central Bank Governor, Ewart Williams, in his monetary report for April, had pinpointed unemployment as a principal concern, noting a lag in the receipt of the true levels of unemployment in the country. In turn, Republic Bank in its news letter, referred to earlier, noted that the unemployment rate averaged an estimated 5.6 per cent this year “compared to 5.3 per cent in 2011”.