Published: Thursday, 24 May 2012
By: Curtis Williams
Central Bank Governor Ewart Williams says the economy is in a slump, with three consecutive years of economic decline, slow implementation of Government projects and a reluctance by the private sector to invest, all contributing to the slowdown. In presenting what he acknowledges will be his last Monetary Policy Report, Williams said yesterday: “The economy has been in a slump and we are waiting on the recovery and the recovery has been delayed.”
“We have had negative growth for three years and that’s our challenge: How do we get out of that slump?” Williams said the figures show in the fourth quarter of last year the economy declined by 2.6 per cent when compared with the same period in 2010 and from all the information the bank had the decline continued into this year’s first quarter.
In the circumstances, the bank has decided to downgrade its growth forecast for this year from 1.5 per cent to one per cent, and even in doing so it noted there were major downside risks to not even achieving that anaemic growth of one per cent.
Williams explained the growth would be contingent on an increase in output from the energy sector, which, he said, had been plagued by a 7.8 per cent decline last year, in part due to maintenance work by the largest gas producer, bpTT. The situation was even more dire in the refining sub-sector, with a 15.3 per cent decline recorded. LNG also took a major hit with a reduction in production of 16.5 per cent, he said.
Williams said for growth to return, output from the energy sector would have to increase and that would be contingent on the maintenance work being completed on time. Asked if that alone would lead to higher output, bearing in mind the natural decline of oil and gas wells, Williams said: “What’s happening now is, in addition to the trend, we are having declines coming out of these mechanical breakdowns, because of safety upgrades, because of maintenance.”
“So in addition to the natural declines we are having other things that are coming in the way, so I don’t expect us coming back to levels of four years ago but I expect the declines will not be as dramatic.” He also identified the present confrontational industrial-relations environment and the inability of Government, labour and business to find a formula linking wage increases to productivity as a threat to the economy and the competitiveness of parts of the export sector.
He said the bank had come to the conclusion productivity was on the decline. He said: “If there is one regret that I have about the collective bargaining process, it is that we have not been able to find a way of linking wage settlements to productivity. So I don’t know whether five is the right number, six, seven, eight, nine, ten, 11, 12. I don’t know what is the right number.”
“What I know is, the indicators that I see are suggesting that productivity levels are coming down.” Williams told the news conference. He said the business community also had identified crime as another factor that was hurting business, with an increase in the cost of security and also in a reluctance to invest further.
Williams said even with the continued contraction of the economy, unemployment levels actually declined to 5.2 per cent last September . He said that masked the reality that there was a reduction in the participation rates in the economy, with more people simply giving up trying to find jobs or simply joining the informal economy as they try to make ends meet.
He noted the Government had a surplus on its budgetary allocations of $2.8 billion which suggested several projects had failed to get off the ground.