Concrete evidence economic growth will resume in Trinidad and Tobago in 2012: IMF

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"There is concrete evidence that the economy of Trinidad and Tobago is turning the corner and that economic growth will resume in 2012 notwithstanding the ongoing technical disruptions in the energy sector.

That's the assessment of a team from the International Monetary Fund (IMF), which visited the twin-Island republic earlier this month.

A statement issued by the head of the IMF mission Judith Gold says real economic activity is projected to increase by 1.7 percent in 2012 as private sector credit expansion gains momentum, the resolution of a large failed insurance company (CLICO) proceeds, the faster pace of government investment continues and energy production returns to normal as the maintenance work is completed while energy prices remain high. Still, the IMF says, there are downside risks to the forecast stemming from the global economic environment, uncertainty in gas prices, and possible delays in the implementation of the public sector investment program.

It says "The economic slowdown that began with the global financial crisis has been more profound and lasted longer than anticipated. The economy is estimated to have contracted by 1.3 percent in 2011, after recording no growth in 2010 and a significant decline in 2009. Ample buffers, including savings in the Heritage and Stabilization Fund, low public debt, and high international reserves, have cushioned the impact of the crisis, including the failure of CLICO.

The IMF team says while unemployment has increased during this period, it remains low at 5.8 percent. Inflation, despite its recent resurgence due to volatility in food prices, also remains moderate at 5.3 percent.

According to the IMF statement, "The 2011/12 budget seeks to provide further support to the economic recovery by maintaining the high level of public capital expenditure, strengthening the business environment, and enhancing the social safety net. The mission agrees that the near-term focus of fiscal policy should be on reviving economic activity, and the timely implementation of the investment program should be a priority. The completion of the restructuring of CLICO claims will also be important to defuse remaining uncertainties.

The IMF says that over the longer term, a shift in the fiscal trajectory will be needed to continue building net savings for future generations, while maintaining public investment to support diversification and growth of the non-energy sector. Such a strategy, it adds, would focus on containing increases in the transfers and subsidies, while better targeting social benefits to vulnerable groups. It would also include a strengthening of the tax effort through ongoing improvement of the tax and customs administration and a broadening of the tax base.

It warns that "Key challenges in the energy sector are the projected depletion of oil and gas reserves and the uncertainty in the gas market as a result of shale gas production in the United States. It says the industry has been successful in redirecting its exports to new markets in view of the falling gas prices in the United States. The mission welcomes the government's focus on improving the regulatory and administrative framework for private sector activity, and fostering investment, including the planned divestment and public/private partnership programs. It will also be important to strengthen public administration and the public service, to ensure effective and efficient delivery of public goods and services.

This is Donn Bobb reporting.

Duration: 3’10″

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