WORSE TO COME
Central Bank Governor paints gloomy picture of economy
Curtis Rampersad Business Editor
Wednesday, August 12th 2009
The worst of the downturn in the local economy is on the way.
Central Bank Governor Ewart Williams said yesterday preliminary financial data showed a "sharp slowdown" in economic activity in Trinidad and Tobago, particularly in the first few months of 2009.
He said, however, it did not suggest things had reached recession or "crisis proportions".
But "as of now, there are no signs that things are beginning to turn around", he said, during a media conference at the Central Bank tower in Port of Spain.
Short-term economic prospects point to what Williams described as a "slowdown that has accelerated" in an economy that was already in decline at the end of 2008.
In the first six months of this year, the economy has continued to degenerate rapidly.
The number and value of new real estate mortgage loans approved in the first six months of 2009 were 29 per cent and 20 lower, respectively, than in the similar period in 2008.
New vehicle sales plummeted by 41 per cent in 2009, compared to 2008.
The number of job layoffs continued to rise in the second quarter of 2009, Williams said, adding that almost 1,000 people received retrenchment notices between April and mid-July.
Imports have also come down since the start of the year by about 50 per cent, compared to 2008.
He recalled that an April report envisaged growth for 2009 in the range of zero per cent to one per cent. "We are still reviewing our projections, but all indications are that there would be a decline in real GDP (Gross Domestic Product) for 2009 as a whole," Williams said. "If this occurs, it would be the first annual decline in real GDP since 1993."
There is a risk, also, that unemployment could increase to between six per cent and seven per cent this year.
Citizens could also continue to pay high prices for food as international price reversals could keep inflation above the targeted six per cent, Williams told reporters.
"Lagging consumer and business confidence could make for a slow recovery in private sector credit demand," he added.
The downturn may also result in a fiscal deficit, the second for the country in consecutive years, he said.
This could translate to a deficit in excess of $1.6 billion by the end of Government's fiscal year in September.
What this means is that Government will have difficult choices to make in its upcoming national budget because large subsidies have become embedded in the budget, and several large ongoing projects need to be completed, Williams said.
While the United States' economy may be on the verge of a slight recovery, Williams said the prospects were not there for Trinidad and Tobago right now.
He said the economic slowdown was likely to last to the end of this year and even after that, would recover slowly.
"We are not yet seeing those signs (of recovery). Several indicators here suggest that things are continuing to decline," Williams said.
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