The Central Bank is keeping its 2.5 per cent forecast for economic growth in 2013, despite some inherent risks within the local economy.
These risks include planned maintenance shutdowns by two of the country’s largest energy producers—bpTT and BGTT—in September that can seriously impact production if they go over schedule.
The bank released its Monetary Policy Report for April 2013 yesterday at the Central Bank Tower, Port of Spain.
“The data we have for early 2013 shows a rebound in natural gas production. We expect the first quarter this year to be pretty good. The real issue is we seem to be turning the corner away from negative growth. We are seeing stability and we want to maintain that as we move ahead. That is why, the co-ordination of maintenance works is extremely important. We do not want to see that (recovery) derailed. None of us want to live through a 2012 in 2013,” Central Bank Governor Jwala Rambarran said.
Real gross domestic product (GDP) for 2012 grew 0.2 per cent. While this was a “welcome reversal” from -2.5 per cent in 2011, Rambarran noted that this was still well below the bank’s one per cent forecast. The second half of 2012 saw the economy return to growth of nearly 1.5 per cent after an unexpected contraction of over one per cent in the first half of the year.
“We have a non-energy sector that has performed well over the last six quarters, and incoming data suggests that we will see a similar performance in the first quarter of this year. Despite the pullback from the maintenance work, you have actually seen the rate of contraction in the energy sector slow by the fourth quarter last year. That is good news,” Rambarran said.
For 2013, while the bank’s forecast “continues to embody a gradual recovery”, there are several risks to the outlook:
1. re-emergence of financial tensions in the Euro area
2. no consensus on fully resolving the US fiscal situation
3. a longer than anticipated shutdown of operations at bpTT and BGTT
4. deterioration of the domestic industrial relations climate
5. further delays in implementation of the planned fiscal stimulus.
“We are confident in our 2.5 per cent projection. It is based on energy growth of 1.8 per cent. This may seem a lot, but it really is just recovering lost ground in 2012. Our estimate in 2012 was -1.9 per cent so if we get the 1.8 per cent, we will be recovering lost ground. On the non-energy side, we are talking about growth of 2.8 per cent,” Deputy Governor Dr Alvin Hilaire said.
Hilaire observed that an International Monetary Fund (IMF) report in March projected 2013 growth for Trinidad and Tobago at 1.5 per cent.
He said while the bank and the IMF did have the same data, since then, the bank has received more recent data upon which it has more confidence for maintaining its original outlook.
“We are more optimistic that there will be more action to smooth out the expected third-quarter decline. The problems are well known and the industry actors are discussing it with the ministry. (The IMF) had also indicated that if co-ordination does occur, then there will be a better forecast. On the non-energy side, they have the same forecast as we,” he said.
Regarding Government’s slow implementation of its fiscal stimulus plan, Rambarran said there were administrative delays and issues relating to invoices that needed to be sorted out. “They have to organise themselves even better to ensure capital programmes can move at the speed required, if we are to be fairly comfortable with the growth forecast,” he said.
The non-energy fiscal deficit, an important indicator of the size of the fiscal stimulus, was over three percentage points of GDP lower than budgeted in the first half of the fiscal year, the report said.
Capital spending—the main thrust of Government’s investment programme to spur economic growth—was almost seven per cent lower than the corresponding period in financial year 2012.