The Minister of Finance told us in Parliament we are not in an economic slump. Further, that the media took the Central Bank Governor’s statement out of context. The facts are: real gross domestic product (GDP) growth in 2009 was -3.3 per cent; in 2010, 0 per cent; in 2011, -1.3 per cent; i.e. we have had no GDP growth for the last three consecutive years. According to the Central Bank the GDP growth for the last two quarters of 2011 was each -2.6 per cent and from the information at the bank it was the same decline in the first quarter of 2012.
The International Monetary Fund (IMF) claims the GDP contraction of 1.3 per cent in 2011 was mainly because of the unscheduled maintenance and technical disruptions in the energy sector and a lack lustre performance in the non-energy sector which accompanied a delay in public capital spending with increasing debt. Recently, bpTT confirmed that the shortfall of natural gas to the Pt Lisas producers will continue to the end of 2013, if not into 2014. Also, this has to do with the situation of its old wells and other facilities! The production of oil continues to drop and is now at 82,467 bbls/d, down from 96,000 in the last quarter and a maximum of 220,00bbl/d in 1978.
Of more concern is our future fiscal sustainability as the IMF tells us:
“Given depleting energy reserves, a major shift in the fiscal trajectory will be required to achieve an
appropriate balance between current and future consumption. The authorities need to choose a path for savings from energy income in order to avoid an abrupt adjustment in the future and provide savings for future generations. The magnitude of savings should also allow for needed investment to promote diversification, but will ultimately reflect a domestic political decision on how to best promote intergenerational equity.” Yet our Government is about spending more and more—the last budget was the largest in our history and they have been back to the Parliament twice for increased allocations. The view being projected is that government spending will take us out of our economic difficulties.
The Minister of Finance has found himself in a difficult situation in which his economic skills must tell him that:
• we are in a technical recession given the accepted definition
• we do not have the growth in the energy sector to support the artificial growth onshore envisioned for government spending
Worse, the future fiscal sustainability of our economy, as warned by the IMF, is threatened by this spending and lack of buoyancy of the energy sector since savings are required to promote economic diversification and intergeneration equity.
Hence, it is disingenuous of our Government to claim that we are not in an economic slump with its eyes on the immediate future, the next election, while the IMF warns that in so doing the adjustment in the future will then have to be abrupt. Eventually, France and others have had to face the fact that austerity was inevitable given their economic situations. Our people have to be told the facts of economic life and what we have to do now for the longer-term good.