Home  News Regional News TT Governor issues economic warning
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TT Governor issues economic warning |
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Sunday, 23 November 2008 |
PORT OF SPAIN – The Trinidad and Tobago economy is expected to record a decline in 2009, Central Bank Governor Ewart Williams said Monday, warning that both the energy and non-energy sectors would contribute to the slowdown.
Delivering the second quarterly Monetary Policy Report (MPR), Williams said that projections were for real Gross Domestic Product (GDP) to decline to about two per cent in 2009 and that "could have some impact on employment" in the country.
He pointed to a sharp decline in oil and gas prices and falling demand for energy-based products including oil, steel and petrochemicals.
"The Central Bank's projection is for slowdown of real economic growth to 3.5 per cent in 2008 down from 5.5 per cent in 2007. Most of the slowdown is coming from the energy sector as the non-energy sector continues to do relatively well. Unemployment remains low at 4.6 per cent with persistent labor shortages mainly in construction and manufacturing".
Williams said that as a result of the present economic situation, unemployment is likely to remain forever at 4.6 per cent but would "fluctuate hopefully in a narrow band in line with the business condition.
During the presentation of the 2008-2009 national budget earlier this year, the Patrick Manning administrations aid that preliminary data showed that real GDP was estimated to grow by at least 3.5 per cent in 2008 which is comparable with the average global growth rate.
The government said that while the growth in the energy sector leveled off in the fiscal year 2008, the non-energy sector continued to register rapid growth and that for the first time in many years the non-energy sector grew at a faster rate than the energy sector.
The 2008-2009 national budget of US$8.3 billion had been based on an oil price of US$70 a barrel, but that price has dropped significantly on the world market.
But Williams said that the Trinidad and Tobago economy, would, in a worst case scenario in which oil prices fall below US$40 a barrel with corresponding declines in gas prices, survive, due to a number of factors including "our level of reserves, our low external debt, the Heritage Stabilization Fund and so on.
"Clearly if oil prices get to 40 dollars you are going to have to use the exchange rate," he said noting that the economy would also be able to withstand the situation due to a US$9 billion foreign reserve.
But the Central Bank governor warned that despite a healthy level, "I know how quickly these reserves can go" making reference to Mexico having to use US$12 billion recently to support its exchange rate.
"They have much more than we do but reserves can go very quickly. I accept the proposition that if oil prices come to 40 dollars (and) given the way our expectations have been ratcheted up, you are going to have to make serious decisions...let us hope it doesn't get there".
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