Cause for concern
It is unfortunate that last week in Parliament Finance Minister Winston Dookeran castigated the media for painting a gloomy picture of the national economy.
The media had merely reported what Central Bank Governor Ewart Williams said when he delivered the Bank's latest Monetary Policy Report.
Williams cited three consecutive years of negative growth or no growth, and the downward revision of this year's projection from 1.5 per cent growth to one per cent.
Dookeran's comments came during debate on the second Supplementary Appropriation Bill for fiscal 2011-2012, in which Government sought (and got) an additional $1.5 billion for expenditure. That takes this year's budget deficit from an original $7.6 billion to $11.8 billion, or 7.6 per cent of GDP. That is cause for concern as articulated by independent senators during the debate, and by media editorials and commentaries.
Interestingly, although he slammed the media, when he wound up the debate, Dookeran spoke of "hard policy decisions" Government may need to resort to if its economic projections are not realised.
He added, "I do not want...it be said that all is rosy..."
Energy Minister Kevin Ramnarine admitted to serious shortfalls in natural gas production. He alluded to future challenges with the USA, once our biggest market for LNG, poised to become a big exporter of cheaply produced gas. Ramnarine also spoke about a general decline in crude oil production and a dramatic decrease on condensate production, from 30,000 barrels a day to 13,000.
The country's economic outlook is grimmer than what Dookeran and Ramnarine appear to have come to terms with, and Government may need to make those "hard decisions" sooner rather than later.
Buoyant oil prices that yielded higher than expected revenues have begun to slide.
The price of West Texas Intermediate crude (the closest to our mix) stood at just over US$100 a barrel for most latter 2011 and up to last April. Since then, it has fallen steadily. Last Friday, it slipped to $82 – perilously close to the budgeted $75.
Oil prices fluctuate based on a number of global influences, the latest dip no doubt coming from grave uncertainties over the economies of several EU countries. Still, there is cause for concern when we combine lower prices with reduced production, and more ominously, no major discoveries of new oil or gas. Of Government's projected revenue of $47 billion, it expects $18.1 billion from the energy sector.
All indicators in this sector show decline, according to the Central Bank Report. Oil production is at its lowest in years, refining slipped by 15 per cent, LNG down 16 per cent, ammonia production declined by 17 per cent, methanol remained stable but with a bleak outlook, and even in iron and steel, Mittal retrenched 120 employees last January. The big question is, would Government realise its projected revenue from energy?
Even before oil prices began wobbling, the Economic Commission for Latin America and the Caribbean (ECLAC) warned in an overview of this country's economic performance,
"Revenue-side risks include lower tax receipts from the non-energy sector and falling prices for oil and gas."
Dookeran, searching for some bright spots on the economy's horizon, mentioned increases in consumer loans for the purchase of motor vehicles and mortgages on property. The Central Bank notes, "There are indeed other indicators that support the assessment of an economy that is still struggling to get into recovery mode...credit demand remains basically weak, particularly for business and consumer credit...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."
Based on all these reports, projections and actual occurrences, there are valid reasons for us to be concerned about the national economy. We are mindful that the global economy remains in near-turmoil. But we expect Government to act judiciously as it navigates the most turbulent economic waters in our time.