I am op­ti­mistic that 2022, ce­teris paribus, will be a bet­ter year for the T&T econ­o­my, even though I don’t ex­pect it will mean in­di­vid­u­als will be bet­ter off.

My op­ti­mism is based on the fact that I ex­pect that for the rest of fis­cal 2022 crude and nat­ur­al gas prices will re­main rel­a­tive­ly strong, there is like­ly to be some im­prove­ment in the lo­cal pro­duc­tion of both com­modi­ties and this will pro­vide more nat­ur­al gas for the pro­duc­tion of methanol, am­mo­nia and urea, all of which are fetch­ing good prices in the in­ter­na­tion­al mar­ket.

The en­er­gy sec­tor’s im­proved per­for­mance in 2022 will pro­vide gov­ern­ment with ad­di­tion­al rev­enue and the coun­try with more for­eign ex­change.

The man­u­fac­tur­ing sec­tor ap­pears to be stead­fast in its mis­sion to dou­ble ex­ports by the mid­dle of the decade and the glob­al econ­o­my has shown that once it can nav­i­gate the vari­ants of the pan­dem­ic, glob­al de­mand will im­prove and so to glob­al growth.

Prime Min­is­ter Dr Kei­th Row­ley has said the Gov­ern­ment does not plan to again shut down the econ­o­my and we have to learn to live with the virus.

His gov­ern­ment has point­ed to vac­ci­na­tion and ob­ser­vance of the COVID-19 pro­to­cols as the so­lu­tion.

The restau­rant, bars and en­ter­tain­ment sec­tors have been among the most hard hit. I sus­pect that the Gov­ern­ment will ease those sec­tors dur­ing the course of the year un­less the new vari­ants prove to be as dead­ly or more dead­ly than the Delta vari­ant.

This is like­ly to help thou­sands of work­ers in the ser­vices sec­tor and the tourism in­dus­try.

But my op­ti­mism is tem­pered by the risks to the econ­o­my caused by the un­known of the pan­dem­ic and the fact that while I ex­pect the econ­o­my to per­form bet­ter than it did last year, we are com­ing from a place where we are on av­er­age sig­nif­i­cant­ly poor­er than we were a decade ago.

One on­ly has to look at the de­plorable state of the roads in the coun­try to know things are not well and the Gov­ern­ment has to act now to get its in­fra­struc­ture projects go­ing.

I have no­ticed that work on the Cen­tral Block of the Port-of-Spain Gen­er­al Hos­pi­tal ap­pears to have stalled. Fur­ther, the Point Fortin High­way which is to be com­plet­ed in 2022, ap­pears more like­ly to be de­layed again.

T&T, as a small open econ­o­my, with a propen­si­ty to im­port re­lies on for­eign ex­change and re­mains vul­ner­a­ble to im­port­ed in­fla­tion.

The re­cent an­nounce­ment of in­creas­es in the price of flour, ce­ment and even beer is just a con­tin­u­a­tion of the in­fla­tion­ary pres­sure the econ­o­my has faced for most of 2021.

It start­ed in Jan­u­ary with the mas­sive jump in steel prices and oth­er con­struc­tion ma­te­r­i­al that sig­nif­i­cant­ly in­creased the cost of con­struc­tion. From the third quar­ter of 2021 peo­ple be­gan to no­tice that their gro­cery bills were go­ing up sub­stan­tial­ly as the price of a lot of the im­port­ed food in­creased.

It was not just based on high­er costs in the food items but on the high­er ship­ping and freight costs and de­lays at the port.

One of the rea­sons this ad­min­is­tra­tion has been able to keep the coun­try qui­et dur­ing what has been six years of eco­nom­ic de­cline has been the con­tain­ment of in­fla­tion.

This con­trol of in­fla­tion is un­like­ly to con­tin­ue in 2022 as sup­ply chain is­sues, ris­ing glob­al de­mand, short­ages, and the con­tin­ued in­ef­fi­cien­cy at the na­tion’s ports put pres­sure on im­porters and prices. There­fore while the coun­try’s fi­nances and even its bal­ance of pay­ments po­si­tion will im­prove the lives of the av­er­age cit­i­zen on fixed in­comes are un­like­ly to get bet­ter.

It is well known that in­fla­tion im­pairs the ef­fi­cien­cy of the price mech­a­nism and rais­es the costs of buy­ing and sell­ing be­cause mon­ey be­comes less re­li­able as a stan­dard of val­ue.

The greater the gen­er­al rate of price in­fla­tion and the greater the shift in rel­a­tive prices, the less is the re­liance that can be placed on mon­ey as a stan­dard of val­ue.

In­fla­tion al­so pe­nalis­es peo­ple on fixed in­comes and favours those whose mon­ey in­comes ad­just quick­ly to price changes.

The for­mer group in­cludes pen­sion­ers, pub­lic ser­vants, and peo­ple work­ing in the pri­vate sec­tor.

Where house­hold in­comes are com­posed of trans­fer earn­ings de­ter­mined by the state, like those on pen­sions or food cards or oth­er help from the Min­istry of So­cial De­vel­op­ment, it is al­ways pos­si­ble to link in­comes to price changes so as to pro­tect re­al in­come; but this has not been our prac­tice and even so the more suc­cess­ful this is ac­com­plished, the greater the in­fla­tion­ary bias in the econ­o­my.

In­fla­tion favours bor­row­ers and pe­nalis­es lenders so long as it is unan­tic­i­pat­ed.

Thus, if in­ter­est rates are fixed in mon­ey terms in the an­tic­i­pa­tion that the lev­el of prices will re­main con­stant, an in­crease in prices will re­duce the re­al cost of bor­row­ing.

In ex­treme cas­es, the re­al cost of bor­row­ing may even be­come neg­a­tive where the in­crease in prices is greater than the nom­i­nal in­ter­est rate.

It is why so many mort­gages are not fixed in that way and one can ex­pect that in­ter­est rates will go up in 2022, mak­ing it more ex­pen­sive to bor­row and may have a dele­te­ri­ous ef­fect on the econ­o­my. Price in­fla­tion, there­fore, has im­por­tant con­se­quences for the dis­tri­b­u­tion of in­comes, for the op­er­a­tion of mar­kets, for savers and in­vestors, for the dis­tri­b­u­tion of re­sources be­tween pri­vate and pub­lic sec­tors, and for for­eign trade and the bal­ance of pay­ments.

If the in­fla­tion is unan­tic­i­pat­ed, then these ef­fects are of­ten capri­cious and un­in­tend­ed.

Con­tin­ued in­fla­tion will lead to an ad­just­ment in be­hav­iour pat­terns which can mit­i­gate some of the dis­tri­b­u­tion­al con­se­quences.

So what can the Gov­ern­ment do?

One thing I hope it does not do is use the ad­di­tion­al rev­enue from the en­er­gy sec­tor to sub­sidise things like flour.

Yes it is hard and we are all per­son­al­ly im­pact­ed by these ris­ing prices but it can­not be that the so­lu­tion is sub­si­dies.

It is why I was dis­ap­point­ed in my MP Rush­ton Paray’s call for the Gov­ern­ment to use its ma­jor­i­ty own­er­ship of NFM and step in and pre­vent it from rais­ing its prices.

Paray must de­cide if he sup­ports gov­ern­ment op­er­at­ing a state en­ter­prise in such a way that it does not care about the mi­nor­i­ty share­hold­ers rights and if the po­si­tion is that the com­pa­ny must sell its prod­ucts at bare­ly break-even prices, or with a view to max­imis­ing re­turns to its share­hold­ers?

Paray was not part of the UNC gov­ern­ment of 2010 to 2015 but he must have cringed at the then gov­ern­ment’s propen­si­ty to sup­port trans­fers and sub­si­dies.

Re­mem­ber the ba­by grant?

I have con­sis­tent­ly said the coun­try has to first ex­am­ine its lev­el and na­ture of spend­ing to avoid waste and cor­rup­tion. It must col­lect all the tax­es due and we must pre­pare for a mod­ern econ­o­my that is in­de­pen­dent of oil and gas. It is why we must de­mand that the prob­lems at the port and at cus­toms are fixed.

This gov­ern­ment has had six years to do it and has failed mis­er­ably.