Economic Outlook 2012
As the end of the year approaches we can certainly say for businesses that it has been a challenging year and all proceeded with caution. The Central Statistical Office projects that we will end 2011 with another real GDP decline of 1.4%.
This is not surprising given that we continue to ride a wave of international uncertainty, hedging against effects of the global economic crisis that started in 2008 and the current debt crises of Euro Zone countries and the U.S., both of which are major export and tourism markets for us.
Domestically, we experienced a turbulent industrial relations climate, unacceptable levels of crime, a state of emergency accompanied by a curfew which impacted business activity and unresolved CLICO and contractors’ payments. Additionally, severely subdued construction activity due to the delayed start up of government initiatives, the absence of new private sector construction projects along with a decline in crude oil and natural gas production contributed to the declining growth rate.
As a private sector we declared our reluctance to invest and our lack of confidence, illustrated by the sharp decline of business borrowings from commercial banks since 2008. In light of this, increased Government expenditure was perceived to be the main catalyst for economic activity in 2011. This increased expenditure to stimulate activity has resulted in continued fiscal deficit, however held against traditional debt ratios T&T appears to be in a comfortable position. We should therefore be cautious against further increases given global economic events and the attendant risks to government revenues.
The Governor of the Central Bank, addressing the Chamber last week, suggested that even against a globally uncertain backdrop as exists now, without further setbacks we can realize real GDP growth of around 1.5% for 2012 with controlled inflation of around 5%. This would certainly require the urgent implementation of initiatives mentioned in the National Budget 2011-2012. It is instructive to note that the Budget estimated a real GDP growth of 1.7% and an average inflation rate of 7% next year.
While we acknowledge the Government’s leadership role in economic development, we recognize that they cannot do it alone. The private sector must fulfill its role as a source of growth and opportunity. The Government’s Medium Term Policy Framework articulates their expectation that “…the private sector will play a greater role… in the area of investment in support of economic transformation” and that “…an annual investment of approximately twenty billion TT Dollars by the private sector…should complement the annual seven to eight billion dollars in public sector investment spending …”
For this to occur, we hold the Government to improving the policy and regulatory environment for business expansion as they stated. The Chamber also looks forward to the implementation of the Private Public Partnership model and the identification and execution of its pilot projects. We intend to work with other business organizations to develop fully the reasons why there is little business confidence in the existing and emerging sectors and to offer recommendations. These findings will allow us to work with the Government to improve the investment climate and hence realise increased investment levels.
