An­tho­ny Wil­son

As we cel­e­brate the 49th an­niver­sary of Trinidad and To­ba­go's In­de­pen­dence and the mus­lim holy day of Eid-ul-Fitr, I con­tin­ue to be op­ti­mistic about the coun­try's fu­ture-an is­land of hope in a sea of pes­simism. As it re­lates to the econ­o­my, I am con­fi­dent that soon­er rather than lat­er, the Gov­ern­ment will wake up and re­alise that the econ­o­my is not where it should be and that it will im­ple­ment mea­sures to stim­u­late lo­cal pri­vate sec­tor in­vest­ment in the on­shore econ­o­my. As cit­i­zens of Seemu­n­gal, pres­i­dent of T&T Hauliers As­so­ci­a­tion, says while the sate of emer­gency is im­pact­ing neg­a­tive­ly on oth­ers, his busi­ness is func­tion­ing ef­fec­tive­ly.

One of the ma­jor in­di­ca­tors of a lack of con­fi­dence by the lo­cal pri­vate sec­tor-which is tied to the lack of lo­cal pri­vate sec­tor in­vest­ment-is the fact that lend­ing to the pri­vate sec­tor has de­clined con­sis­tent­ly.

In its lat­est 're­po rate' re­port, is­sued last Fri­day, the Cen­tral Bank found that pri­vate sec­tor cred­it grant­ed by the con­sol­i­dat­ed fi­nan­cial sys­tem grew by 1.5 per cent in June 2011 on a year-on-year ba­sis. The Cen­tral Bank not­ed that loans out­stand­ing to con­sumers rose by 5.4 per cent in June this year com­pared with June 2010 and that loans for the ac­qui­si­tion of new ve­hi­cles rose by 11 per cent while con­sumers ex­pand­ed their fi­nanc­ing of pur­chas­es via cred­it cards by 9.6 per cent.

In turn, this seems to mean that Cor­po­rate T&T-and I am in­clud­ing all busi­ness­es in this from the largest con­glom­er­ates to the mi­cro en­ter­pris­es-are re­luc­tant to en­gage in new bor­row­ing in the con­text of the stag­nant econ­o­my. Is the pri­vate sec­tor wait­ing to see clear ev­i­dence of green shoots and blue skies be­fore it would be will­ing to em­bark on new lines of cred­it to fund new plant and equip­ment or new en­ter­pris­es? As a CEO of a lo­cal man­u­fac­tur­ing com­pa­ny told me last month, no busi­ness is go­ing to un­der­take new in­vest­ments if they are not sure about the con­sumers' con­fi­dence in the lo­cal econ­o­my and the abil­i­ty of those con­sumers to trans­late that con­fi­dence in­to pur­chas­ing de­ci­sions.

But, ac­cord­ing to the lat­est Cen­tral Bank sta­tis­tics, con­sumer con­fi­dence is back as loans to con­sumers have in­creased for nine con­sec­u­tive months. The ex­pec­ta­tion, there­fore, is that busi­ness con­fi­dence-trans­lat­ed in­to an in­crease in loans to busi­ness for new in­vest­ments-should fol­low close­ly on the im­prove­ment in con­sumer con­fi­dence. It may be that Cor­po­rate T&T does not con­sid­er that the re­cov­ery in loans to con­sumers is a good enough in­di­ca­tor to sig­nal the start of a re­ju­ve­na­tion of new busi­ness loans and new busi­ness in­vest­ment.

Con­sid­er the fact, as cit­ed in the Cen­tral Bank's Eco­nom­ic Bul­letin for Ju­ly 2011, that the quar­ter­ly in­dex of GDP-sea­son­al­ly ad­just­ed, at con­stant prices and on a year-on-year ba­sis-has reg­is­tered neg­a­tive growth in six of the last nine quar­ters. That means that be­tween Jan­u­ary 2009 and March 2011, which is nine quar­ters or 27 months, the T&T econ­o­my reg­is­tered pos­i­tive growth on­ly dur­ing: the fourth quar­ter of 2009 (by 0.8 per cent); the first quar­ter of 2010 (by 1.9 per cent) and in the third quar­ter of 2010 (by 1.1 per cent). In the oth­er six quar­ters since the be­gin­ning of 2009, the growth tra­jec­to­ry of the lo­cal econ­o­my has been neg­a­tive.

In the first quar­ter of 2009, the econ­o­my de­clined by 4.8 per cent. This was fol­lowed by a de­cline of 3.3 per cent in the sec­ond quar­ter of 2009 and a de­cline of 6.2 per cent in the third quar­ter. There were al­so de­clines in the sec­ond quar­ter of 2010, by 1.2 per cent and in the fourth quar­ter of 2010 by 3.6 per cent. This year in the first quar­ter, the econ­o­my de­clined by 1.7 per cent. It is in­ter­est­ing that the econ­o­my con­tin­ues to de­cline-and busi­ness con­fi­dence con­tin­ues to be weak-even though spend­ing by the Gov­ern­ment for the first 10 months of the 2011 fis­cal year, that is from Oc­to­ber 2010 to June 2011, is 13.6 per cent high­er than in the Oc­to­ber 2009 to June 2010 pe­ri­od.

That may be due to the fact that the main area of growth in re­cur­rent ex­pen­di­ture was in the area of trans­fers and sub­si­dies, which in­creased from $12.6 bil­lion for the first 10 months of the 2010 fis­cal year to $16 bil­lion for the first 10 months of 2011. It is quite like­ly that a sig­nif­i­cant per­cent­age of the $3.3 bil­lion in­crease in trans­fers and sub­si­dies was di­rect­ed to the fu­el sub­sidy. So as we ap­proach the sec­ond bud­get of the Peo­ple's Part­ner­ship ad­min­is­tra­tion, the state of the T&T econ­o­my is that lo­cal con­sumers are pos­i­tive but lo­cal busi­ness­es are not. Giv­en the tur­bu­lence in the in­ter­na­tion­al mar­kets and the pos­si­bil­i­ty that the Unit­ed States econ­o­my could be stag­nant for a sig­nif­i­cant pe­ri­od, what re­al­is­tic hope is there of re­newed growth in the lo­cal econ­o­my in the fore­see­able fu­ture?

If the US econ­o­my is creep­ing along, it means that our Caribbean neigh­bours are not go­ing to re­cov­er as fast as they would if the US econ­o­my were mov­ing ahead at a fast clip. And, of course, if our Caribbean neigh­bours do not re­cov­er, what chance is there of the T&T man­u­fac­tur­ing sec­tor mak­ing bold new in­vest­ment de­ci­sions? And we have not even be­gun to fac­tor in the im­pact of the State of Emer­gency.

Is our pri­vate sec­tor's pes­simism jus­ti­fied?

So, why am I op­ti­mistic? More next week.