PORT OF SPAIN: After registering “disappointing growth” in 2012, Trinidad & Tobago is poised for a modest recovery in 2013, the International Monetary Fund (IMF) has announced.
In a statement, the IMF said the economy is reviving and that maintenance-related outages would continue to hamper the energy sector. It said the non-energy sector should grow around 2.5 per cent and core inflation remains moderate.
The IMF said it estimates considerable slack in the economy and that policy should support the economy in the short run.
“The overall fiscal deficit is expected to grow to 2.5 per cent of GDP (gross domestic product) in fiscal year 2012/13, which provides broadly appropriate support for growth, along with still-accommodative monetary policy,” the IMF said. “Sustainable growth requires reconsidering fiscal policy. Fiscal policy should be placed in the long-term context of the country’s non-renewable resource endowment.
“A gradual path of fiscal adjustment that allows the economy to enjoy the fruits of its energy sector wealth well into the future is achievable by a combination of revenue reforms and current spending restraint. In particular, subsidies are on an unsustainable path, with fuel subsidies particularly difficult to justify. This strategy should create space to ramp up development spending over time. Progress in protecting against financial vulnerabilities should be sustained.”
The IMF said that the passage of a new Securities Act should be followed by legislative reforms in the insurance, credit union and pensions sectors, adding that key nonbank systemic financial institutions should be brought within the regulatory perimeter. It also said that structural reforms were needed to foster a diversified economic base.
“Achieving a more diversified base will require investment outside of the energy sector,” the IMF said. “This will, in turn, require structural reforms to increase the government’s capacity to implement its development budget, along with initiatives to improve the country’s competitiveness in attracting private sector investment.”