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IMF predicts T&T to grow 2.2% in 2014
The International Monetary Fund (IMF) is predicting that the T&T economy will grow by 2.2 per cent this year, after it experienced 1.6 per cent growth in 2013, according to the IMF’s Regional Economic Outlook for Latin America and the Caribbean, which was published on Thursday.
The IMF document said that in 2014, the commodity exporters in the Caribbean (such as T&T, Guyana and Suriname) are expected to grow by 3.2 per cent, while the tourism-dependent economies are expected to grow on average by 1.4 per cent in 2014.
The IMF said: “Growth has been stronger among the region’s commodity exporters—in particular Guyana and Suriname—and in Haiti, whose economy expanded 4.0 per cent on the back of ongoing reconstruction spending and increased agricultural output and textile exports.”
For the tourism-dependent economies, 2014 is expected to be better than last year when real GDP growth picked up modestly in 2013 (to 0.75 per cent, up from close to zero in 2012). According to the IMF, Construction activity seems to have bottomed out, but tourist arrivals and spending have continued to underperform in most countries.
The report concludes that reducing high public debt levels remains a key challenge in much of the Caribbean along with further efforts to address long-standing competitiveness problems, notably in the tourism-dependent economies.
The international financial institution dedicated a section to energy subsidies in Latin America and the Caribbean. “High oil prices since 2008 have increased pressures on countries to provide energy subsidies—even though these have fiscal costs and nontransparent effects on distribution and efficiency.
“Energy subsidies are a worldwide phenomenon, and broadly speaking, are as prevalent in Latin America and the Caribbean (LAC) as in other regions. Depending on how they are measured, fuel and electricity subsidies amounted to between 0.7 and 2.2 percent of GDP in the average LAC country during 2011, broadly similar to the average for countries in the Asia-Pacific and sub-Saharan Africa regions, and somewhat higher than in Europe.
“This range, however, masks much variety in the size of subsidies (large in some energy-rich LAC countries), the type of subsidies (with some countries mainly subsidising fuel, and others subsidising the electricity sector or public transport), whether they give rise to budgetary transfers, or whether they account for a significant share of government revenues, thereby constraining fiscal policy.
“Fuel subsidies tend to be larger and more entrenched in energy-rich LAC countries (such as T&T). This is similar to what is observed in energy exporters in the Middle East and Central Asia. Some countries set domestic fuel prices below international prices as a permanent form of social policy to transfer natural resource wealth to the public.”
The IMF also said that the gap between international and domestic prices of fuel products is particularly large in Venezuela (where subsidies represented about 7.0 per cent of GDP in 2013), Ecuador (6.0 per cent of GDP), and T&T and Bolivia (4.0 per cent of GDP each).
All graphs are from the IMF’s Regional Economic Outlook for Latin America and the Caribbean