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IMF forecasts drop in growth for T&T

The International Monetary Fund (IMF) is projecting a mixed 2013 economic outlook for Trinidad and Tobago, with a projected growth rate of 1.5 per cent.
This is one per cent less than the Central Bank’s recent 2.5 per cent forecast.
Last year, the Fund projected 1.7 per cent growth; the Bank estimated growth to be around one per cent.
An IMF delegation visited Trinidad and Tobago from March 15 to 27, speaking with various officials from the Government, Central Bank, private sector and labour unions.
In a statement yesterday, IMF mission head Elie Canetti said the Fund expected the energy sector to register only marginal growth in 2013 “due to further significant maintenance-related outages in the latter half of the year” although there is potential for some upside, with greater co-ordination in scheduling of maintenance operations between oil and gas producers and the downstream users.
The non-energy sector should register growth of around 2.5 per cent, capitalising on the momentum towards the end of 2012, the Fund said.
Last year, the energy sector had contracted 7.3 per cent in the second quarter, but grew slightly in the third by 0.5 per cent.
The Fund found the country’s fiscal position realised a deficit of 1.1 per cent of GDP in 2011/12 from near balance in the previous fiscal year, owing to a decline in energy revenues due to output shortfalls although there was some offset by a drop in current expenditures (as a per cent of GDP).
The mission said it projected a fiscal deficit of 2.5 per cent of GDP for the current fiscal year ending September 30, 2013.
“Trinidad and Tobago has suffered from several years of sub-par growth, with economic performance hampered in significant part by supply constraints…. There is continued progress on financial sector reforms…. While challenges remain, a final resolution of the problems stemming from the 2009 failure of insurer CLICO is in sight.
In the long run, Trinidad and Tobago will continue to benefit from an ample non-renewable resource endowment and a highly-educated workforce. It is critical to take decisions now to share more equitably the fruits of that wealth across generations and to ensure that future generations can continue to benefit from a high standard of living,” the Fund said.
The Fund said to achieve this, Government needs to rethink its spending in a long-term context.
“The allocation of spending should be tilted more towards investing in the country’s future capacity to create jobs and growth and better targeted towards benefiting the most vulnerable segments of the population. This will require moving back towards a fiscal surplus over the medium term while targeting subsidies and transfers towards the poor and ramping up development spending.
“Finally, and critically, even as growth revives, unlocking Trinidad and Tobago’s full potential will require a wide variety of structural reforms to help the economy run more efficiently, notably, to transform the Public Service to become more efficient and to reduce impediments to doing business,” the Fund said.
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