An economist is warning of an increase in unemployment and a worsening of the country's current account deficit, unless Government makes a quantum leap in the policy environment to ensure economic stability and meaningful growth.
Valmiki Arjoon said Government needs to embark on a "well thought out strategy articulated to the public to foster diversification, business development, industrial activity and increased utilisation of productive capacity."
He said the fact that monetary and fiscal regimes have not been accompanied by economic stimulus packages has contributed to declines in almost every sector.
"Such hardships are likely to continue in the coming year," he told the T&T Guardian.
Arjoon said he expects further reductions in the labour force because the high cost of doing business will force many firms to cut staff. In addition, he said, cutbacks in plant and equipment, further investments, and operating costs will further erode productivity.
Without a concerted effort to diversify and penetrate into new international markets, he further warned, "there will be a continued worsening of our current account deficit of US$1.08 billion."
Arjoon expects the foreign exchange crisis to worsen unless there are new strategies to earn foreign exchange.
He added: "Many small and medium companies could still find themselves in a bind to access sufficient foreign exchange to fulfil their import obligations.
"Confidence in the economy especially by foreign investors will continue to be a matter of concern, and as such there could be a paucity of new foreign direct investment (FDI). Capital flight will also continue and many investors will prefer to invest their finances abroad where returns are more lucrative, which will exacerbate the demand for foreign exchange."
According to Arjoon, these issues will "raise doubt as to whether the Government will be able to raise the budgeted $47.44 billion revenue for the fiscal year."
"It is highly likely that the Government will continue to engage the local and foreign debt markets," he said, adding that they might dip further into the Heritage and Stabilisation Fund (HSF).
He is advising that Government to engage in the proposed divestment of state assets and extend this to foreign investors to earn foreign exchange, rather than continue to increase the country's debt burden."
Arjoon said because of the increase in interest rates in the United States, any new debt that we raised that markets will be at a higher interest rate and the increased debt will put a strain on savings and crowd out potential future investment.
"The same funds that could be used in the future to invest in economic expansion would be used instead for debt repayment," he said.
He also said it is unlikely that efforts to enhance tax revenue collection via the Revenue Authority will be given due diligence.