A leading business forecasting firm has expressed doubt about the ability of the People's Partnership administration to create a long-term plan to boost growth in the non-energy sector because of the difficulties it perceives in the Government building consensus on the way forward.
In an essay headlined "Political Honeymoon Won't Last Long," Business Monitor International, said that while Prime Minister Kamla Persad-Bissessar's election on May 24 placed her in a strong position root out corruption in political institutions, "building consensus will be the main political obstacle to implementing policies to address structural deficiencies in the economy."
BMI stated: "Unfortunately, we doubt T&T's new government can devise a credible economic strategy that will boost long-term growth in the non-energy sector. As a result, the economy will remain overly dependent on oil and gas production, in our view, and the weakening outlook for the energy sector over the next 10 years has encouraged us to downgrade our long-term average growth projections to just 3.5 per cent from 4.3 per cent previously between 2010 and 2019.
"Moreover, although the economy is nowhere near facing a balance of payments crisis, we believe the country's external accounts are in a process of structural shift, with lower volumes of both imports and exports set to become the norm."The key driver of this slowdown in trade will be the energy industry, as lower net energy exports have a dramatic impact on both import and capital inflows over the long term."
Despite its gloomy long-term outlook, BMI said that there was still cause for short-term optimism."T&T's decision to cut the petroleum profits tax will help bring the country in line with tax rates in competing investment destinations internationally. The announcement will also be a major boost to the attractiveness of T&T's deepwater blocks ahead of the Deep Atlantic bidding round."BMI said that one reason for the interest in T&T's round is likely to be the fallout from the Macondo oil leak in the US Gulf of Mexico.
"Companies such as Anadarko, which have been heavily affected by the moratorium on new drilling, may see moving into T&T as a way of diversifying their deepwater operations while retaining the logistical advantages of remaining geographically close to their customer bases."BMI conducts country risk and macro-economic forecasts across 175 markets.The forecaster said that while T&T had been one of the Caribbean's economic outperformers over the past decade, "this picture is beginning to change as the outlook for the major driver of economic growth, the energy sector, begins to slow."