The Trinidad and Tobago economy experienced a decline that was "sharper than anticipated" during the second quarter of 2012, with the energy sector experiencing a "substantial contraction" of 7.3 per cent and with the non-energy sector contracting by 0.7 per cent, according to Central Bank data presented yesterday.
The decline of 3.6 per cent in the April to June quarter followed a decline of 0.1 per cent in the first quarter of 2012 and a reduction in output of 2.2 per cent in the fourth quarter of last year. The data indicate that the local economy has declined in the last five quarters out of six, with T&T's fiscally important energy sector declining by 7.3 per cent in the second quarter of 2012, 0.6 per cent in the first quarter of the year and 7.6 per cent in the last quarter of 2011.
Despite the gloomy news, Central Bank Governor Jwala Rambarran said the Central Bank was seeing "some underlying signs of incipient recovery" during the second half of 2012, as "the available data that we have for the energy sector actually suggest that there is likely to be a return to growth in the third quarter."
Based on the Government's fiscal stance of stimulating the economy, which he described as "broadly appropriate," Rambarran said the Central Bank was projecting a one per cent rate of growth in calendar 2012, "possibly rising to 2.5 per cent next year."
He said the short-term forecasts of growth in the second half of 2012 and into 2013 were based on three fundamental assumptions: That the energy companies would fully complete their maintenance programmes; that the industrial relations climate would return to some semblance of stability and that the Government must implement its public sector investment programme in a timely and efficient manner.
Responding to questions after his presentation, Rambarran said in order for the economy to grow by one per cent for all of 2012, there would need to be growth of just under two per cent in the non-energy sector in the second half of the year and a contraction of one per cent in the energy sector. "That combination will lead to overall growth on one per cent for 2012," said Rambarran.
Asked about the impact of the resolution of the Clico matter on monetary and fiscal policy, Rambarran said: "It is supposed to be more of a confidence-inducing impact, rather than an impact you can factor directly. One of the things we are quite clear on is that Clico itself and the resolution issue has weighed on public confidence throughout the past three years. "Now that we are coming close to resolving the issue, the expectation is that this would, in some way, provide a filip to business and consumer confidence."
On the issue of the country's public debt, excluding Treasury Bills and Notes issued for open market operationism, had jumped to $71 billion in September 2012 from $51 billion a year earlier. "It is very important note that almost $20 billion of that outstanding public debt is related to financing as a result of the Clico resolution," said Rambarran.
He said almost two-thirds of the financing of the fiscal deficit for 2013 would take place on the local market. Rambarran also said the Central Bank undertook an examination of the "substantial drop" in the unemployment data for the fourth quarter of 2011.
When the bank dissected the 4.2 per cent statistic, it found that there had been an increase in short-term government projects in the construction and agriculture sectors in that period, which coincided with the end of the state of emergency last year.
"At the end of the day, this raises concerns about the sustainability of job gains throughout the course of this year because these were clearly short-term projects and to date we have not seen any discussions of these projects or any materialising," said Rambarran. He said while inflationary pressures had abated for 2012, "we are yet to feel the full impact of the global increases in food prices."
