Central Bank Governor Jwala Rambarran "cautioned against the increasing euphoria" over oil and gas discoveries announced in 2012, and advised the Government to place "the windfalls as additional savings in the Heritage and Stabilisation Fund (HSF)."
Rambarran, who spoke at yesterday's quarterly luncheon of the T&T Chamber of Industry and Commerce at Westmoorings, said, "Three hydrocarbons discoveries have been announced in 2012 which are expected to positively affect energy output in coming years.
Bayfield Energy and Petrotrin announced discoveries early in the year while BPTT announced a one trillion cubic feet gas find in mid-November. I must caution against the increasing euphoria that has accompanied these discoveries. The government must resist the easy seduction of another energy boom," he said.
"Instead, it must treat any of the associated windfalls from these hydrocarbon discoveries as temporary, placing the windfalls as additional savings in the HSF, rather than imprudently consuming them. And it must move on with the diversification thrust that it has already kickstarted if it wants to secure lasting prosperity for all," he said.
Rambarran told the chamber, "Both the Minister of Finance and myself have had extremely good relations," since his (Rambarran) taking office five months ago. "We speak nearly every week," he said. "I think the Minister of Finance has similar concerns about how we manage the energy wealth."
He said that while "budget 2013 addresses the issue of falling crude oil production by reducing the supplemental petroleum tax (SPT) rate on shallow water marine exploration and by granting a five-year tax holiday on deepwater exploration" and "there could be a boost to exploration and drilling in the near term, the long production lag implies that the positive impact of these tax measures on oil output would be felt in the medium term."
In his outlook for 2013, the Central Bank Governor said: "Here, at home, certain domestic factors seem to suggest a cautiously optimistic outlook for 2013. First, as noted earlier, there are some underlying signs of an incipient recovery this year. Preliminary estimates from the Central Bank suggest a turnaround in the T&T economy, with real gross domestic product (GDP) growth expected to be around 0.75 per cent in the third quarter of 2012."
He said "a revival in the production of natural gas and liquefied natural gas (LNG) is expected to increase activity in the energy sector by some 0.5 per cent in the third quarter of 2012. A better performance in the finance sector and a slight increase in construction should support overall growth of 1 per cent in the non-energy industrial base.
The full completion by firms in the energy sector of their major maintenance operations would provide a further strong boost to growth in 2013." Second, there have been "indications of a modest improvement in the pace of project implementation at the level of central government," he said. Third, for the most part, businesses should not be facing major credit constraints, he said.
"The launch of the Clico Investment Fund (CIF) on November 1 should give a cautious boost to overall confidence and reinforce the economic growth trend," the central banker said. "Based on these underlying assumptions and the turnaround in the third quarter, the Central Bank is maintaining its projection for real GDP growth of around one per cent for all of 2012, and growth is expected to strengthen to 2.5 per cent in 2013," he said.