Economists: TT inflation falling

TRINIDAD AND TOBAGO’s inflation rate has been falling steadily over the last decade, but Government can ill-afford complacency since warning signs have emerged which could see that rate climb once more. These were the views of former Central Bank Governor Winston Dookeran and Republic Bank senior economist Dr Ronald Ramkissoon, when they addressed a Greater Chaguanas Chamber of Industry and Commerce luncheon at Kampo Restaurant in  Chaguanas yesterday. Ramkissoon said TT has fared better than most developing nations when it came to managing inflation, noting that inflation has dropped from 22 percent in 1973 to four percent in 2003. He added that successive governments have managed to keep the country’s core inflation rate at two percent.

However, the economist said Government could not be complacent since there are many price pressures which must be managed to keep the inflation rate down. He identified increasing food prices as the most challenging of these price pressures, predicting that TT “would reach developed-nation status as far as inflation is concerned,” once it was able to keep food prices down. The economist added that finding domestic substitutes for certain foreign food imports would help to lower food prices and put a smile on the faces of lower income earners. Ramkissoon noted that the national unemployment rate was stuck at 10.5 percent and wondered whether TT was close to “full employment.” Explaining that high wage demands would cause inflation to increase, Ramkissoon suggested that collective bargaining processes be adapted to allow a win-win situation for workers and employers and for increased training of persons to fill shortages in certain skills.

Dookeran agreed with Ramk-issoon’s diagnosis of the economy, but said Prime Minister Patrick Manning should adjust Government’s inflation target from seven percent to four and a half percent. He suggested that Government focus on inflation-targetting instead of relying on exchange rate-targetting to keep inflation down, and wondered whether the PNM was properly managing the economy. Dookeran said there must be “transparency in the conduct of monetary policy” and criticised the exclusion of the Central Bank from the Freedom of Information Act. He added that Government must give a mandate where price stability is concerned. Referring to a Central Bank report published in March, Dookeran said there was some capital flight in 2003 due to socio-political problems and TT was well on the way to creating a “well-developed financial system.”