Food, not energy, fuelling inflation

Addressing a breakfast meeting hosted by the TT Manufacturers Association (TTMA) at the Crowne Plaza Hotel, Williams said the current unprecedented hike in global energy prices is not driving inflation, but it is "the steady increase in food prices." In expressing this view, Williams appeared to contradict the views of his predecessor (now UNC political leader) Winston Dookeran that risks posed by TT’s strong dependence on energy revenues to fund Government’s $34 billion 2005/2006 Budget would soon become evident.

Observing that inflation was a worldwide problem today, the Governor said inflation was being driven by high energy prices in nations like the US (4.7 percent) and Jamaica (19 percent). Williams said TT was shielded from this phenomenon because of its ability "to absorb the increase in world energy prices," but rising food prices remain a problem where inflation is concerned because of "deep seated causes" connected to insufficient focus on agriculture in TT over the years.

Noting that recent floods may cause additional increases in food prices, and that some local farmers seem more inclined to tap into lucrative regional markets to sell their crops, Williams said more must be done to provide "an impetus for an increase in production in agriculture."

While noting that measures outlined in the Budget (including bulk importation of certain foods, bringing new Caroni lands into agricultural production and use of a smart card) will help to curb food prices, Williams said the effects of these measures would not be seen overnight. He said there must be a longer term vision for achieving agricultural production in TT. He reiterated that while headline inflation (driven mainly by food prices) has been "outside our comfort zone of five percent for most of 2005, core inflation in TT remains low at 2.5 percent and the bank is taking measures to keep inflation in check. He suggested that measures such as land reform and incentives for farmers should be examined. Williams also said Government had good intentions in focusing on using excess energy revenues to develop TT’s economic infrastructure, is mindful of capacity constraints where expenditure is concerned and is taking the necessary measures to address those constraints.

The governor said wage increases should be tied to worker productivity to prevent inflation from occurring in this area. Williams added that he was pleased to see the country’s trade unions demonstrating restraint, keeping wage increases between 12 to 18 percent, even in the Public Service.

However, he said this will prove to be a challenge in the new fiscal year. Williams urged the TTMA to work closely with the bank to ensure that manufacturers’ export competitiveness is not negatively impacted by inflation. TTMA director/ RBTT Merchant Bank director Lyndon Giuseppi highlighted the concerns of the manufacturing sector and expressed the hope that appropriate discussions would help stakeholders "to identify solutions and the way forward."