Published: Tuesday November 18, 2008
The International Monetary Fund (IMF) has called on the Government to cut back its infrastructure expenditure as well as the range of subsidies.
The IMF said that after seven consecutive years of economic growth, T&T’s growth rate would slow as a result of a detriorating external environment.
“Recessions in advanced economies, their spillovers to the tourism-dependent economies of the region and sharply lower prices for energy products are projected to slow growth to 3.5 per cent in 2008 and 2 per cent in 2009,” said Christina Daseking, deputy division chief in the Western Hemisphere Department of the Washington-based IMF.
She said the IMF expected oil prices to average about US$60.
Prime Minister Patrick Manning said last week that the Government would have to revisit its $51 billion 2008-2009 budget because of falling oil and natural gas prices. The budget is pegged on an oil price of US$70 and a natural gas price of US$4 per million metricc British thermal units (mmbtu).
With fertilizer prices declining sharply over the past few months, several plants in the Point Lisas Industrial Estate, have ceased production and are using the downtime to do maintenance work. As a result, the National Gas Company has excess gas to on its hands and service companies in the energy sector are feeling the pinch.
Daseking was speaking during a news conference at the Ministry of Finance tower, Eric Williams Financial Complex, Independence Square, Port-of-Spain, following the completion of the IMF’s regular Article 4 Consultation with the T&T Government.
She said that T&T’s current account surplus is expected to decline by 13 per cent to about 15 per cent of gross domestic product (GDP) in response to falling energy export earnings. Under its present budget, T&T will move into a deficit of 2 per cent of GDP.
She said that fiscal policies need to be adjusted to already lower energy prices and the possibility of a considerable economic slowdown in 2009.
“Fiscal revenues and trade surpluses are projected to decline significantly as a result of falling energy prices. Thus, even though the government has cushions to weather shocks, spending adjustments are warranted to contain the deterioration in the fiscal position and safeguard sustainability under more difficult circumstances,” she said.
She said there was a need to reduce the large non-energy deficit to generate adequate savings in the Heritage and Stabalisation Fund that would allow the country to benefit from its existing energy wealth.
Daseking said the main policy challenges are to prepare for the risk of contaigon and preserve macroeconomic stability in the face of declining energy revenues and still high inflation.
“The most pressing need is to prepare for the possibility of more severe spillovers from the global financial crisis by strengthening the crisis-response framework and developing contigencies measuers,” she said.
She said the Government has scope for reducing expenditures while targeting them more efficiently to support its development objectives.
“In this light, the recent increase in electricuty tariffs and the price of premium gasoline are steps in the right direction and should be built upon by adopting a comprehensive approach to phase out unproductive subsidies over time,” she said.
Source: Trinidad Guardian Newspapers