Tourism has been down in Tobago, manufacturing exports have not been doing too well, construction is at rock bottom, and the population is not spending. It has not been a very good year! The Central Bank Governor, Ewart Williams during an interview last week with the Business Guardian, described this gloomy outlook. Williams said as a consequence to these factors and the global economic downturn, T&T experienced a sluggish economy where the population demonstrated very little confidence. Recounting from the inception of this sluggish era, Williams stated that it was pretty bad in the first three quarters of 2009 where the economy declined sharply.
Then he noted that the decline was halted in the last quarter of the same year. "But things began to pick up and there were some signs of activity in the first quarter of 2010," he said. Like the rest of the world, he said things began to slow down again from March 2010. Locally T&T faced many uncertainties with the additional issue of the general elections, which he said complicated things even more, where as a result, citizens decided to adopt a wait and see attitude. Some of the uncertainties he outlined were fuelled by the large increase of unemployment -the figure showed 6.7 per cent "but I think it was even higher than that, the construction sector almost grind to a halt, people began to very worried about the future employment prospects." Thus, Williams said, "from March up to now, there seems to be some kind of underlying confidence issue in the economy. People have not been spending, they have not been borrowing, the banks have not been lending and there is very little investment going around and that is what explains the sluggishness in the economy."
Little growth
"Despite the Government's effort in trying to get the economy started by offering an investment programme, there has been little evidence that this investment spending has started," Williams said. It means that the non-energy sector has not been increasing its exports to Caricom and this would explain the very little, if any, growth this year, he added. But he said the little growth really came from the high energy prices. The energy prices have been much higher than expected and now its close to $90 a barrel, so that's one positive, he said. Another positive, the Governor highlighted has been the global demand that led to the increase for petrochemicals-methanol, urea and ammonia-which has been doing fairly well. But, on the down side to this, oil production is declining, Williams said. "It is becoming more and more difficult as we are producing just about 100,000 barrels a day, opposed to 120, 000 barrels; that is a big jump," he lamented.
T&T had some buffers
Williams stated T&T managed to survive both the international and local challenges because the country had built up savings which was crucial for any survival. "We have a high reserve cushion of about $8-900 billion, which was attributed to the high oil prices in 2006,07,08," he said. "This is what really cushion the impact and because the country was doing alright then; we did not have to borrow and therefore our debt was kept under control." He added that the expansion of the energy and construction sectors during the Manning Administration, which provided citizens with a lot of work, also boosted the economy. "It was so good that we had to import labour. But now there is a lot of people unemployed as a result of the slow down, "Williams said. Unemployment was reduced to 3.5 per cent now it is at six per cent, he added.
Government's incentives...are they enough?
"Something has to happen to pull people out of the present slump," Williams cried. He said the Government is trying by promising to pay its contractors, announcing its public sector investment programme, infrastructure projects including roads and houses and by encouraging the private sector with its incentives. But the Governor said the business community stated that these initiatives were not sufficient. Asked if he thinks the incentives are enough, Williams said: "We have to see...its not clear...the whole thing becomes complicated by the uncertainty with Clico and the uncertainty on the labour front with the unions." "Therefore, we have to find a way of resolving all these uncertainties. I think the Government has put its finger on the right button when it says, one of the most important things to change, is the Ease of Doing Business." "But that is easier said than done."
So what 2011 holds for T&T?
"Even though I think that an economy does not stay in the doldrums and at some time it comes out...I think we are not going to see for quite sometime the kind of growth we had in 2006,07 and 08, which is about 6.7 per cent." That is not going to happen, he added. But the Governor questioned if what was offered would be sufficient to pull out the T&T economy. He said there is hope though that the economy would begin to experience growth during 2011. But emphasised that the growth rate would be less than what the country was experiencing in the boom years. "We would have to settle for much more manageable growth rate of two to three per cent over the next five years." Williams advised that T&T cannot depend on the same strength of the energy sector. "We have to move pretty quickly to find this diversification platform the Minster is talking about." However, Williams stated that he was not certain exactly what the Minister had in mind.