THE CENTRAL Bank’s projection last month of improved economic activity for the year 2023 was followed this week by the Central Statistical Office’s announcement that the economy grew by 1.5 per cent in 2022, marking a return to growth after a somewhat depressed period, including the economic trauma of 2020 and the tumbling of commodity prices before that. Growth of about three per cent was also recorded for the first quarter of 2023.
While these figures supply cause for hope, they have rightly provoked some degree of caution from businessmen.
“The three per cent growth, on paper, is a good thing,” said Vivek Charran, the president of the Confederation of Regional Business Chambers. “However, the issue is, given the length of time in which this growth has occurred, we should have seen some real effects.”
One period of growth is not going to cut through the effects of inflation. Nor will it address the longstanding challenges faced by businesses, including increased security costs, long waiting periods for various government services and tepid consumer spending.
According to Rajiv Diptee, president of the Supermarket Association, businesses are still facing shocks such as supply-chain issues coming out of the pandemic and the Russian/Ukrainian war and climate change.
“Consumers have different costs and expenses to look at,” Diptee said. “You are seeing a more wary consumer. When they come into the stores, they are more deal oriented.”
There are not yet enough signs of a trickle-down. In fact, there is continued concern that the signs of hardship – writ large in our city spaces, with their high levels of begging and homelessness – continue, providing a stark contrast to all the new figures.
At the same time, it must be noted the Government has recently provided much cause for optimism by issuing bonds to cover VAT refunds to the tune of $3 billion, bringing the total amount of refunds to about $5 billion for 2023, as of May.
While admittedly such measures relate to funds people are already entitled to, that is not the full extent of the State’s efforts.
Central Government expenditure grew by $5.2 billion (year-on-year) to $40.4 billion, due mainly to an additional $3.6 billion in transfers and subsidies, including an increase of $890.5 million in transfers to households due to the petroleum subsidy that amounted to $1.0 billion. Capital spending has also increased to $2.3 billion, compared to $1.7 billion recorded in the comparative period of the previous year. Salaries continue to be paid in the public sector, grants and allowances issued. That’s just some of the State’s support.
But whether we look at the glass half-full or half-empty, there are signs the economy is not yet in the clear.
The projected deficit is now expected to reach $6.5 billion, far greater than the initial budgeted deficit of $1.5 billion. While this is expected to be financed from domestic sources, the implications for government policy are clear.
The next budget could see more cuts in an effort to impose fiscal discipline, a matter that could hurt consumers more.