JavaScript is disabled in your web browser or browser is too old to support JavaScript. Today almost all web pages contain JavaScript, a scripting programming language that runs on visitor's web browser. It makes web pages functional for specific purposes and if disabled for some reason, the content or the functionality of the web page can be limited or unavailable.

Wednesday, July 9, 2025

Pre-bud­get 2025 stock­tak­ing:

T&T economy not on a sustainable path

by

Indera Sagewan
283 days ago
20240929

Bud­get 2024 is up­on us and every­one wants to know what the econ­o­mists have to say. Is it go­ing to be a belt tight­en­ing or good­ies bud­get? Will we hear de­fin­i­tive de­ci­sions on in­creased wa­ter and elec­tric­i­ty rates? Are oth­er sub­si­dies to be re­duced or re­moved? Gate? CDAP? Se­nior Cit­i­zens Pen­sion?

The Min­is­ter of Fi­nance is ul­ti­mate­ly a politi­cian, and tra­di­tion tells us that the na­tion­al bud­get pre­ced­ing an elec­tion is al­ways a ma­jor cam­paign­ing tool and fund­ing source of the gov­ern­ing par­ty. I don’t ex­pect this to be any dif­fer­ent.

The ev­i­dence sug­gests that un­less the eco­nom­ic tra­jec­to­ry of the coun­try de­vi­ates from its cur­rent dis­mal trend, fears of hard­er times post the 2025 elec­tion will no doubt be­come re­al­i­ty. The Min­is­ter of Fi­nance has al­ready put us on no­tice, when, in the par­lia­ment, he stat­ed that it is prov­ing very dif­fi­cult to fi­nance the pur­chas­ing of free phar­ma­ceu­ti­cals for the chron­ic dis­ease as­sis­tance pro­gramme (CDAP). Al­so, the Min­is­ter of Pub­lic Util­i­ties is on record that cit­i­zens must help pay T&TEC’s $4 bil­lion nat­ur­al gas bill. The crazed scram­ble to col­lect prop­er­ty tax is an­oth­er sign.

That said, let’s take stock of where we are in 2024, and in­deed pon­der whether we are bet­ter off as a coun­try af­ter nine years of the cur­rent ad­min­is­tra­tion . Of course, we must be fair and ac­knowl­edge COVID-19 and its crush­ing so­cio-eco­nom­ic im­pact (2020-21), as well as the largesse that flowed in­to the trea­sury on ac­count of the Ukraine/Russ­ian War (2022).

In May 2024, the IMF pro­ject­ed a grad­ual and sus­tained eco­nom­ic re­cov­ery for T&T af­ter it record­ed in 2023, a 2.1 per cent re­al growth. This came af­ter 10 years of per­sis­tent neg­a­tive growth. The Fund pro­ject­ed growth of 2.4 per cent for 2024. Of course, pos­i­tive re­al growth is cause of cel­e­bra­tion and if it’s sus­tain­able go­ing for­ward, a Min­is­ter of Fi­nance’s Christ­mas wish come true. Un­for­tu­nate­ly, 2024, does not look set to val­i­date the IMF’s pro­jec­tion.

More­over, is growth with­out new em­ploy­ment gen­er­a­tion or forex gen­er­a­tion wor­thy of be­ing la­belled sus­tain­able? I posit that it does not.

The Fed­er­al Re­serve Bank of the Unit­ed States, re­cent­ly re­duced the bank’s lend­ing rate for the first time since COVID-19, be­cause, while in­fla­tion is now un­der con­trol, a con­tin­u­a­tion of the high bank rate threat­ened to dis­rupt the labour mar­ket by in­creas­ing un­em­ploy­ment. This is not good for the econ­o­my. So, at the risk of be­ing la­belled pro de­moc­rats, the Bank has done what is in the best in­ter­est of the coun­try’s sus­tained growth, em­ploy­ment be­ing a key el­e­ment.

Of­fi­cial­dom in Trinidad and To­ba­go boasts 5.4 per cent un­em­ploy­ment (close to full em­ploy­ment), If on­ly word on the ground sup­port­ed this. The num­ber of high school and uni­ver­si­ty grad­u­ates un­em­ployed or at best un­der­em­ployed speaks a dif­fer­ent sto­ry. Even if we take this 5.4 per cent un­em­ploy­ment at face val­ue, in­di­vid­u­als 30-49 years rep­re­sent­ed 59.8 per cent of the un­em­ployed and per­sons 15-29 28.1 per cent.

In ad­di­tion, and cause for grave con­cern is the labour force par­tic­i­pa­tion rate, which tells us the num­ber of em­ploy­able per­sons ac­tive­ly seek­ing em­ploy­ment. This stood at 54.6 per cent in the first quar­ter of 2024, falling from 55.5 per cent in 2023. In essence, per­sons are in­creas­ing­ly drop­ping out of the ac­tive labour force in T&T. This calls for ur­gent in­ter­ven­tion to find out why and re­verse.

Now, let us look at the pos­i­tive growth of 2023 and as­sess its sus­tain­abil­i­ty. At the be­gin­ning of fis­cal year 2023, the en­er­gy sec­tor (the main­stay of the econ­o­my) was pro­ject­ed grow by 2.95 per cent. In­stead, it con­tract­ed as fol­lows; ex­trac­tion of nat­ur­al gas de­clin­ing by 11.3 per cent, re­fin­ing, in­clud­ing liq­ue­fied nat­ur­al gas drop­ping by 11 per cent, crude oil ex­plo­ration and ex­trac­tion by 9 per cent and con­den­sate by 10.2 per cent.

In Ju­ly 2024, the Cen­tral Bank in its Mon­e­tary Pol­i­cy Re­port stat­ed that the “en­er­gy sec­tor is ex­pect­ed to con­tin­ue its down­ward tra­jec­to­ry this year.” Fun fact, T&T is cur­rent­ly pro­duc­ing half the vol­ume of nat­ur­al gas need­ed to main­tain cur­rent de­mand by its do­mes­tic LNG/petro­chem­i­cal plants).

There is there­fore no ba­sis for any new in­vest­ment in this sec­tor. Yet, we con­tin­ue with blind­ers along this sin­gu­lar path. You see, the fu­ture of this sec­tor rests sole­ly on the Drag­on deal with Venezuela, which is chal­lenged (me be­ing gen­tle).

And even if the Drag­on was to ma­te­ri­alise, we won’t see gas well be­yond 2028 and the vol­ume would on­ly be suf­fi­cient to main­tain cur­rent de­mand ca­pac­i­ty. Again, no sur­plus gas for sec­tor growth. That equals no new em­ploy­ment cre­ation.

Where then did this sus­tained re­cov­ery come from in 2023? Ac­cord­ing to the Min­istry of Fi­nance’s Re­view of the Econ­o­my for 2023, it came from the fol­low­ing non-en­er­gy in­dus­tries: Trade and re­pairs 10.9 per cent; man­u­fac­tur­ing 1.6 per cent; food, bev­er­age and to­bac­co 7.6 per cent; pe­tro­le­um and chem­i­cal prod­ucts con­tract­ed -1.8 per cent; and min­ing and quar­ry­ing 2.6 per cent. These were the big-tick­et in­dus­tries. Note that with­in man­u­fac­tur­ing, the petro­chem­i­cal in­dus­try which de­pends on nat­ur­al gas sup­plies, con­tract­ed, due in large part to gas cur­tail­ment. Are you see­ing sus­tain­abil­i­ty in these growth ar­eas? This econ­o­mist does not.

In 2023, Tourism (which should be a no brain­er), was flour­ish­ing in our neigh­bour­ing is­lands. Caribbean tourism was lead­ing the world in post COVID-19 re­cov­ery. In T&T, vis­i­tor ar­rival in 2023 was 21 per cent low­er than 2019 lev­els, and 2019 for T&T was no great year for tourism.

Like agri­cul­ture, tourism is an­oth­er bas­tard child. Ba­si­cal­ly, tourism in Trinidad equates to Car­ni­val and we’re do­ing a great job at de­stroy­ing what lit­tle ex­ists with the pro­lif­er­a­tion of crime. Maybe that’s the “sus­tained” growth the IMF is ref­er­enc­ing? We can now boast world leader at crime fa­cil­i­ta­tion, in­stead of the once leader in nat­ur­al gas and petro­chem­i­cal pro­duc­tion.

Let’s talk agri­cul­ture and food se­cu­ri­ty. Long a na­tion­al im­per­a­tive, re­peats it­self in every bud­get. Un­for­tu­nate­ly, ac­tion does not align with rhetoric.

Agri­cul­ture is lucky if in any fis­cal year it is al­lo­cat­ed $1 bil­lion. It gen­er­al­ly hov­er around $750 mil­lion and of that, 90 per cent is for re­cur­rent ex­pen­di­ture leav­ing a mere $75 mil­lion for growth project. Of course, there are the al­lo­ca­tions to the ADB and Namde­v­co etc, but the in­ef­fec­tive­ness of these state en­ter­pris­es to tru­ly sup­port this sec­tor needs a col­umn of their own.

Facts, in 2023 with the ex­cep­tion of rice and some veg­eta­bles, co­coa (sup­pos­ed­ly our sig­na­ture crop with tremen­dous po­ten­tial for forex earn­ing) con­tract­ed by 90 per cent from 85,000 kilo­grams to 85,000 kilo­grammes. Can you grasp this? Note­wor­thy is that in the 1930’s we pro­duced over 36,000 tonnes, yes, tons not kilo­grams of fine flavour co­coa pure­ly for ex­port.

Sim­i­lar­ly, the co­conut in­dus­try which by in­ter­na­tion­al re­ports has tremen­dous growth and rev­enue gen­er­at­ing po­ten­tial is plagued by dis­ease, even af­ter spe­cial projects aimed at its re­cov­er. And I have said noth­ing about the hoist of peren­ni­al chal­lenges such as prae­di­al lar­ce­ny, land tenure, cli­mate change.

Ac­cord­ing to the CSO, the re­tail sales in­dex ex­pand­ed by 4.8 per cent, tex­tiles and ap­par­el by 6.2 per cent; house­hold ap­pli­ances and fur­ni­ture by 4.7 per cent and dry goods by 1.5 per cent. No need to won­der where the scarce forex is go­ing. We con­tin­ue to be a dis­tri­b­u­tion econ­o­my. This is not sus­tain­able growth, es­pe­cial­ly giv­en the con­tract­ing forex earn­ing en­er­gy sec­tor. The av­er­age per­son can­not ac­cess forex, cred­it card lim­its are con­tin­u­al­ly be­ing ad­just­ed down­wards,

T&T’s debt to GDP ra­tio is 71 per cent, debt ser­vic­ing equates to around 30 per cent of our na­tion­al bud­get, Of­fi­cial re­serves are US$5.53 bil­lion rep­re­sent­ing 7.8 months im­port cov­er. The HSF has US$5.89 bil­lion (March 2024). This equates to 70 per cent of the av­er­age an­nu­al bud­get. This is not a healthy po­si­tion.

There is much work to be done to tru­ly put T&T on a sus­tain­able growth tra­jec­to­ry. It is ev­i­dent af­ter nine years that the cur­rent ad­min­is­tra­tion can­not get this job done. Yes, this bud­get will be about win­ning the next elec­tion, but what then?

The Econ­o­mist In­tel­li­gence Unit’s take on the T&T econ­o­my go­ing for­ward. “Giv­en the heavy re­liance of the econ­o­my on oil and gas, wan­ing do­mes­tic hy­dro­car­bons pro­duc­tion will cause GDP growth to de­cel­er­ate over the medi­um term, and soft­er en­er­gy prices will re­main a risk to the out­look through­out the 2024-28 fore­cast pe­ri­od. Un­less there is po­lit­i­cal will to di­ver­si­fy the eco­nom­ic base of the T&T’s econ­o­my, cra­paud smoke we pipe.


Related articles

Sponsored

Weather

PORT OF SPAIN WEATHER

Sponsored