By LEISELLE MARAJ Friday, November 13 2009

click on pic to zoom in

Central Bank Governor Ewart Williams...

THIS country is technically in a recession, Central Bank Governor Ewart Williams admitted yesterday saying that real Gross Domestic Product (GDP) is estimated to have declined for the second quarter of 2009 by 3.6 percent compared to the second quarter 2008. This meant three straight quarters of GDP decline since there was decline of 4.6 percent for the first quarter 2009 and one percent in the last quarter of 2008.

At the launch of the October 2009 Monetary Policy Report at the Central Bank in Port-of-Spain, Williams said although recession has been defined as two to three consecutive quarters of GDP decline, TT has been performing better than other economies.

“Perhaps by conventional definition we are (in a recession), it is the third consecutive quarter of GDP decline. I insist however these conventional definitions need to be taken with a pinch of salt. For one thing, the US is coming out of recession and from an unemployment rate of 10.2 percent. Similar unemployment rates are occurring in Europe. Our unemployment rate increased from five to 5.1 percent. Are we in a recession? Perhaps we are. What’s in a word?” Williams asked.

Despite a commendable economic performance when compared to the region and other developing countries, Williams warned government that it has to do its best to ensure it keeps its assurance that fiscal balance is achieved by 2012, to avoid a shaky public debt situation and that transfers to the Heritage and Stabilisation Fund are maintained.

“In order to sustain economic activity, government had to forego its policy of fiscal surpluses to run a rather sizeable fiscal deficit of five percent of GDP. We had the fiscal space to afford that deficit. The budget for 2010 provides for another deficit of around five percent of GDP. This second deficit is likely to result in an increase in public debt of close to 50 percent. We are coming close to the levels where we should be worried about our public indebtedness. It is important that government takes steps to return to fiscal discipline quickly,” he said.

Second quarter results also reveal growth in the energy sector of 2.2 percent but a decline in the non-energy sector of 7.5 percent in the same period. Manufacturing output is down and there has been a decline in activity in the construction and distribution sectors, he said. Williams noted inflation is down mostly because of the downturn and private sector confidence continues to be low. He said as a result of the economy’s performance for the first half of 2009 and signals from the third quarter, Central Bank does not foresee any pick up in private sector demand for the rest of the year.

The Bank therefore revised its GDP projections for the year to a decline of 1.5 to two percent from 0.9 percent GDP growth forecasted in its April 2009 Monetary Policy Report. He added that the unemployment rate is expected to increase from its present rate of 5.1 percent to 5.5 percent by the end of the year, a decrease in its original projection of six percent made in April.