Economic growth will be seen in Trinidad and Tobago in 2023 and beyond, but there is still much to be addressed concerning the improvement of the local economy.
The Central Bank Economic Bulletin for January 2023 stated, “Economic activity is anticipated to improve in 2023, bolstered by activity in the energy sector. Key upstream energy sector projects will help to boost domestic energy sector production.”
Economist Professor Roger Hosein agreed with this assessment, explaining that he expects T&T to see economic growth over the next four years.
“I’m not surprised at all because part of this growth is the reopening of the economy and part of this growth would also be on account of improved economic activity in the distributional sector. So, I am not surprised and I expect growth to continue from 2023 to 2027 simply because the economy contracted sharply between 2016 and 2021, “ said Hosein who added this would be propelled by natural gas returns.
“We are expecting some elevated natural gas figures after 2022. And there’s a correlation of about 0.96 between natural gas production and real GDP. So I am not surprised to see economic growth in 2022, and economic growth in 2023. I expect moderate to weak economic growth from 2023 to 2027,” he said.
While this was seen as a positive, the bulletin’s note that domestic inflation would continue to rise in early 2023, Hosein said, would continue to be onerous for workers on fixed income salaries.
“Fixed income workers would have seen between January 2014 to November 2022 an increase in the overall price level of about 31.2 per cent and in the food price index of about 67.8 per cent. Those are relatively high numbers. And so with inflation continuing to rise and potential erosion of purchasing power fixed income households would become more agitated,” said Hosein.
On Friday, it was confirmed that the T&T Police Service accepted a four per cent wage increase after negotiations with the Chief Personnel Officer.
The four per cent deal had been the only deal offered by the government, but Hosein said this increase would do little to offset the rising costs faced by the public.
The economist also noted that based on IMF projections, inflation would continue to be higher on average than what had been seen in the previous decade. He suggested that these inflationary pressures could be potentially offset by further integration of the growing Venezuelan community into the formal workforce.
“If one were to look at this IMF forecasted data on inflation, one would see that for the period 2022 to 2027, the average expected inflation rate would be about 3.28 per cent. You could compare this with an average annual inflation rate of about 2.6 per cent for the period 2014 to 2019. So again, the inflation rate in the medium term is expected to be higher than the inflation rate in the period, 2014 to 2019,” said Hosein.
“What we need to do is to boost the supply capacity of the T&T economy. And we have about 100,000 Venezuelan workers that are unregistered. Why don’t we register them and give them more basic privileges in the economy and allow them to work? Not in a rum shop and bars and casinos and the informal sector but more in the formal sector where they can make a better contribution to economic activity and in so doing helped to enhance output and by extension supply and reduce price levels in the economy,” he said.
The Central Bank bulletin stated, “The pace of domestic recovery will depend in large measure on the extent of business confidence, and relatedly how much progress is made in improving the ease of doing business in T&T.”
On this point, Hosein felt more could be done to increase the ease of doing business in the country.
However, he again pointed out that the crime situation and indeed the murder rate served as a major hindrance in that regard, with the fact that murders crossed the 600 mark in 2022, a particularly worrying statistic.
Hosein said, “Unless policymakers change and improve the governance structure within which the production function in T&T operates that murder level in my opinion, with adversely impact economic activity, by reducing the quality of labour, reducing the quantity of labour by diverting resources away from the capital formation into security and related activities.”
He said new Police Commissioner Erla Christopher would have her work cut out for her in that regard.
“I don’t think the ease of doing business measures are in place. I think we need to do much more work on is of doing business front. I think it is doable. I hope the new commissioner of police will make a dent in the murder level in particular so we have to watch this and see how it unfolds under her watch in the next six months,” Hosein said.
But also worrying to Hosein was the Central Bank’s admission that “over the short term, energy prices are anticipated to remain elevated but may experience some softening.”
He pointed out that this would adversely affect the economy, especially given the fact the Government had based its budget on high energy prices.
“The government of T&T pitched at the highest ever assumed budgetary numbers for natural gas of US $6 per MMBtu and US Dollars $92 per barrel of oil. At any point in time, I found those numbers very high and the numbers today are definitely lower. I did a quick check and since the budget was read, the average daily price of oil has been about $78 and the average daily price of gas has been about US$4.38. Those numbers are significantly less than the budgeted assumptions and with the budgeted numbers we were expecting a fiscal deficit of about 1 billion dollars. So, with these lower numbers, we are, probably going to see an even larger fiscal deficit for the fiscal year 2023,” said Hosein.
The economist also called on the government to continue working to reduce the ratio of transfers and subsidies to capital injection, noting that while there had been some improvement in the past year, more needed to be done.
