Last update: 05-Dec-2013 3:57 pm
Thursday, December 05, 2013
Trinidad & Tobago Guardian Online
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IMF forecasts modest growth for T&T
T&T is poised for a modest recovery in 2013, the International Monetary Fund (IMF) has said. In its staff report follow bilateral discussion in T&T in March, the IMF said the economy is reviving and maintenance-related outages will continue to hamper the energy sector. It said the non-energy sector should grow around 2.5 per cent and core inflation remains moderate.
“The main drivers are expected to be finance, distribution and construction,” the report said, adding that there was a considerable slack in the economy last year, with non-energy output remaining some four per cent below potential. “While data limitations put a wide band of uncertainty around this estimate, negative growth in the non-enegy economy in the three years prior to 2012, as well as relatively quiescent core inflation and slow credit growth, support the assessment that economic slack is likely to be significant.”
The IMF is predicting a deficit of 2.5 per cent of FDP due primarily to payment of wage negotiation settlements and a further increase in subsidies and transfers. The report continued: “In addition, exemptions and zero-ratings on the value added tax (VAT) introduced in the fourth quarter of 2012 are likely to reduce revenues by 0.2 per cent of GDP.” The IMF said gross official reserves—equivalent to 12 and a half months of imports of goods and non-factor services—remained strong at US$9.2 billion at the end of 2012.
A gradual path of fiscal adjustment that allows the economy to enjoy the fruits of its energy sector wealth well into the future is achievable by a combination of revenue reforms and current spending restraint. “In particular, subsidies are on an unsustainable path, with fuel subsidies particularly difficult to justify. This strategy should create space to ramp up development spending over time. Progress in protecting against financial vulnerabilities should be sustained.”
The IMF said that the passage of a new Securities Act should be followed by legislative reforms in the insurance, credit union, and pensions sectors adding that key nonbank systemic financial institutions should be brought within the regulatory perimeter. It said that structural reforms were needed to foster a diversified economic base.
“Achieving a more diversified base will require investment outside of the energy sector. This will, in turn, require structural reforms to increase the government’s capacity to implement its development budget, along with initiatives to improve the country’s competitiveness in attracting private sector investment,” the IMF added.
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