(Trinidad Express) – No economic growth and more job losses this year.
These are the projections of the Central Bank as Trinidad and Tobago emerges as one of the casualties of the global financial meltdown.
Central Bank Governor Ewart Williams painted a grim economic picture and tough times for Trinidadians and Tobagonians in the months ahead as the country continues to struggle with the effects of rising unemployment and high inflation and food prices.
“The indicators are that the rate of deceleration (of growth) is happening faster than was first thought,” Williams said as the bank released its first Monetary Policy Report for the year on the country’s economic activity at the Central Bank Auditorium in Port of Spain. “There has been a significant reduction in sales and construction as well as a sharp decline in the sales of new and used cars. There have been various episodes in the energy and construction sectors,” he said.
Central Bank data indicated that consumer confidence was also down with six out of every ten consumers expecting business conditions to worsen, the report said.
Retail sales have plummeted to 7.2 per cent in the fourth quarter of 2008 from 22.4 per cent in 2007 while new cars sales have dropped 42 per cent in the first quarter of 2009.
Bank credit expansion has decelerated and Williams said there was evidence that some commercial banks were actually refusing deposits from customers.
“The indicators show the economy is decelerating sharply,” Williams said, adding that even though inflation (now at 11.7 per cent) had come down, food prices had fallen from their peak, they were still “significantly higher” than many countries in the world.
Core inflation, at around five per cent, was also still “extremely high”, he said.
But the worst was yet to come.
Central Bank data projected that the real GDP projection this year would be “no growth” in the economy this year, or at best, just about one per cent this year, much lower than the 3.5 per cent last year.
It also means even greater job losses in the country in 2009.
“There will be a continued increase in job losses and lay-offs and unemployment which stood at 4.2 per cent in the third quarter of 2008 is expected to reach six to seven per cent before the end of the year,” Williams suggested.
Thousands of people, particularly in the construction and energy sectors, have been laid off as energy prices and demand plummeted on world markets.
As joblessness in the country increases, Williams said there would be pressure on Government to develop a stimulus package to boost the economy.
Beyond any kind of stimulus to the economy, Williams suggested it would be prudent for Government to match any kind of package with “strict fiscal discipline”.
He also stressed again that the Central Bank continued to intervene to sell foreign exchange to commercial banks and would maintain this policy since a depreciation in the exchange rate would complicate efforts to reduce inflation and contain wage pressures.
There is no move to devalue the currency, he said.
But depressed energy prices will continue to constrain the national budget and oil prices are unlikely to get to the US$80 to US$100 per barrel figure in the next few years, Williams said.
Therefore, there may need to be a recalibration of national budgets until 2014 of no higher than US$75 a barrel, he said.
