T&T economy will contract again if gov't fails to spend on infrastructure - central bank

The Trinidad and Tobago economy is expected to grow by one to two per cent this year, central bank governor Ewart Williams has said.

Presenting the April 2011 Monetary Policy Report, Williams said that although the pace of economic activity so far has not supported the previous prediction of two to three per cent growth, 2011 will be a year of recovery.

"We anticipate there is sufficient evidence of an improvement in private-sector confidence. The most substantial piece of evidence is the turnaround for credit expansion, consumers are slowly beginning to spend again," Williams said at his monetary policy briefing.

"Inflation has come down by 9.4 per cent ... we are on the way up, we are not going down; we are coming out of a period of decline and we think we are on the way up," he said.

The IMF predicts growth of 2.2 per cent for Trinidad this year.

Williams said in the fourth quarter of 2010, gross domestic product declined by 3.8 per cent which offset the growth in 2010.

"Last year, there were two things: the private-sector demand was very weak and the government's fiscal impulse was not forthcoming. This year, private-sector demand seems to be picking up, albeit slowly," he said.

"With some help from the government budget, I think we could meet the growth of one to two per cent; without that, we are likely to have another year of decline."

The central bank governor said he expects the Persad-Bissessar administration to accelerate infrastructure spending in the second half of the fiscal year, which "if this comes to pass, we could expect to see growth of one to two per cent in 2011," he said.

If the government does not invest, and the oil-producing economy contracts for a third year, Williams said it would translate into lower income for a large number of Trinidadians and increased poverty.

"When you are having decline and high inflation it clearly translates into poverty. Another year of decline would make it a third consecutive year of decline - we don't want to do that. It affects the psyche of the private sector, and we are seeing enough to suggest that private-sector confidence is beginning to recover," he said.

- CMC