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Projected growth hard to achieve
The Governor of the Central Bank, Jwala Rambarran, has joined in the optimism of Finance Minister Larry Howai in projecting one per cent growth for 2012. In the instance of the Governor, it is important to note the bases upon which the optimism is founded and the sufficiency of those assumptions.
The first assumption Governor Rambarran is making is that the energy companies will complete their maintenance programmes and so restart their drilling and production programmes. Second, the Governor assumes that the tension in the industrial-relations climate will be eased, allowing for productivity to be resumed in full, along with cordial relationships between employers and employees.
The third assumption of the Governor’s prediction is for the Government’s Public Sector Investment Programme (PSIP) to be implemented in a timely and efficient fashion to achieve his projected one per cent growth for 2012.
On the first assumption, even if the energy companies finish the maintenance work on their offshore platforms this year, it is unlikely that they could return to a level of production before the end of the year such as to make an impression on the 7.3 per cent decline experienced by the energy sector in the second quarter.
In fact, figures from the Ministry of Energy indicate a continuing decline in oil production over the third quarter of this year, reaching a low of 77,288 bpd in September and a steady decline in natural-gas production to September 2012. Further, the major energy companies are yet to take up Government’s incentives to go into the deeper horizons offshore with high-risk capital to drill for new supplies.
It therefore seems too short a period for the kind of turnaround being projected by the Governor to bring about growth by the end of this year. His second assumption—industrial peace—is hinged on the satisfactory settlement of a number of outstanding industrial agreements in the public sector.
Many of those negotiations are at present under contentious dispute and it could be more than a little optimistic to expect they will be rapidly or easily settled, given the political reality of the industrial-relations climate of the day.
One segment of the trade-union movement has taken up very heated political issues with the Government. So even if all the outstanding negotiations are satisfactorily settled over the next couple of months, the political contentions will continue to cloud the industrial-relations landscape.
The third assumption, of the PSIP being implemented in a timely and efficient manner, has not happened for quite a long time. Budget reviews extending back into the long past have shown large portions of the PSIP being cut when funding is required to meet immediate recurrent expenditure needs.
Also, successive finance ministers have complained about the incapacity of the public sector to implement the programmes and projects identified in the PSIP.
The reality of the development projects being consistently sidelined by more immediate spending and the inability of the governments to develop and enhance the capacity of the public sector to administer and monitor the PSIP projects are not likely to change in time to have the kind of impact required to meet the Governor’s projection for growth by the end of this year.
Further, achieving the growth projected by Governor Rambarran has to come against the background of steady economic decline over the last three years. By the Governor’s own telling, the economy declined substantially by 3.6 per cent in the second quarter of this year and 0.7 per cent for the first quarter of 2012.
It would seem, therefore, that the assumptions are tenuous and the projected growth, no matter how devoutly wished, is difficult to achieve in the short term.