Once again Central Bank Governor Jwala Rambarran is predicting a level of growth in the economy which seems unrealistic. On the release of the April 2013 monetary report on Tuesday, the Governor projected a 2.5 per cent growth in gross domestic product for 2013.
This comes after his projection last year that the economy would grow by one per cent failed to materialise; 0.2 per cent was the figure for 2012.
Renewed predictions of significant levels of economic growth come against the background of the continuing factors which militated against the governor's projections of last year, that is, that the major natural-gas producers, bpTT and BG T&T, have not given any indication that the maintenance (as opposed to exploration and production) activities they have been focusing on are likely to end any time soon.
In fact, according to the Central Bank report, "BPTT and BG T&T are expected to continue major maintenance operations with a significant shutdown planned in September 2013 which could dramatically affect output."As it is well known, this economy continues to be even more dependent on revenue from the energy sector, particularly the natural gas sub-sector.
What then is the basis for the ambition of the governor to achieve a massive 2.5 per cent growth in GDP in the current year?The speedy implementation of a number of government infrastructure projects, including the San Fernando to Point Fortin highway, is hoped for as a way to kickstart the construction industry, in particular, to achieve the projected growth levels for 2013.
However, the bank's monetary report notes that already Government spending in the economy to stimulate economic growth has been "weaker than anticipated in the first half of 2012/2013," thereby militating against a "stronger pace of economic recovery."Combined with the above factors, the bank states that "the non-energy fiscal deficit, which is an important indicator of the size of the fiscal stimulus, was over 3.0 percentage points of GDP lower than budgeted during the first half of the fiscal year."
For the period, capital spending, which is the main thrust of the Government's investment programme to spur economic growth, "was almost seven per cent lower than the corresponding period." What is responsible for the shortfall in spending, according to the bank, is the same old story of the inability of government infrastructure to facilitate implementation, and consequent delays in the implementation of several projects.
And while the bank's report does not indicate so, there may very well be shortfalls in expected revenue that are contributing to the lower levels of spending by the Government in the economy. Another factor could be that the world economy is still in slow recovery mode.Added to that is the fact that the economies of T&T's major trading partners in Caricom are still in decline, with huge external debts.
The point is that Governor Rambarran has to be very careful, and in the tradition of central bankers, must be more conservative in his projections. Overly ambitious projections could harm more than simply his personal credibility.He must also understand that the word of the governor and of the Central Bank are depended upon by many in the economy.