PORT OF SPAIN, Trinidad (CMC):

Trinidad and Tobago is expected to record negative growth for the last financial year as the oil-rich twin-island republic seeks to deal with the slowdown occasioned by the global economic and financial crisis, Finance Minister Karen Nunez-Tesheira said Monday.

Delivering the TT$44.3 billion (US$7.38 billion) budget to parliament, she described the economic performance for 2009 as "challenging".

"For 2008 as a whole, economic growth measured 2.3 per cent. The annual growth rate does, however, mask the economic slowdown which began towards the end of 2008 and has continued in 2009."

She told legislators that real gross domestic product (GDP) is estimated to have declined by one per cent in the last quarter of 2008, and this decline "continued in the first quarter of 2009, when real GDP fell by three per cent".

Decline continues

She said several other indicators, including falling retail sales, declining construction activity, and contracting private sector credit, seem to suggest that the decline has continued beyond the first quarter of the year.

"This is projected to be our first year of negative growth since 1993," she told Parliament, adding "It is important to note, however, that by international standards, a one per cent decline in economic growth in the current circumstances would be viewed as creditable performance."

She quoted the International Monetary Fund (IMF) as projecting that real GDP would decline by 2.8 per cent in the United States in 2009; over four per cent in the United Kingdom and Euro Area and over six per cent in Japan.

"In the region, real GDP is projected to decline by 3.5 per cent in Barbados and close to three per cent in Jamaica. While official statistics are not available, all the OECS countries are expected to register negative growth."

Nunez-Tesheira said that the unemployment rate for the first quarter of 2009 stood at five per cent, up from 3.9 per cent in the last quarter of 2008, but still within the definition of full employment.

"This notwithstanding, the Government will continue to take steps to contain the rise in unemployment," she said, adding that the decline in energy exports combined with the rise in foreign-exchange demand for current and capital transactions has led to a significant increase in Central Bank foreign-exchange sales.

But she told legislators that the official reserves remain robust at US$ 8.6 billion, the equivalent of 11 months' import cover, well above the international benchmark of three months.

Estimated debt

Nunez-Tesheira said that the country's total debt stock, which stood at 60 per cent of GDP at the end of 2001, declined to 37 per cent of GDP at the end of 2008 and is estimated to rise to 39 per cent at the end of 2009.

"This is well below that of many of our regional and extra-regional economies and is in line with the accepted international benchmark ... even our inflation which has been one of our biggest challenges has shown a remarkable decline. Headline inflation has steadily retreated in recent months from a high of 15.4 per cent in October 2008 to a low of 5.9 per cent in July 2009: the lowest rate since 2005."

In her presentation, the finance minister said that the 2009 budget had been based on an oil price of US$70 per barrel and a gas price of US$4.00 per million cubic feet. But by December 2008, oil prices had plunged to US$35 per barrel and gas prices declined to US$3.25 per million cubic feet.

She said the government made two adjustments to the budget to deal with the situation and the decline in economic activity in 2009, decreasing private sector expenditure and the threat of rising unemployment prompted the Patrick Manning government to re-introduce many of the capital programmes that were postponed earlier this year.

"As a result, the preliminary fiscal outturn is for an overall deficit of approximately TT$8.4 billion (US$1.4 billion), the equivalent of 6.3 per cent of GDP. This is comparable to major advanced economies which, as a group, average over 10 per cent.