GEISHA KOW­LESSAR ALON­ZO

Even as T&T’s econ­o­my ap­pears sta­ble on the sur­face, econ­o­mists are cau­tion­ing that head­line in­di­ca­tors may be mask­ing deep­er struc­tur­al chal­lenges.

They are urg­ing pol­i­cy­mak­ers, as at­ten­tion turns to the up­com­ing mid-year bud­get re­view, to ad­dress long-stand­ing is­sues such as lim­it­ed eco­nom­ic di­ver­si­fi­ca­tion, weak pro­duc­tiv­i­ty growth and per­sis­tent fis­cal vul­ner­a­bil­i­ties.

An­a­lysts warn that with­out tar­get­ted re­forms re­flect­ed in the Gov­ern­ment’s up­com­ing mid-year pol­i­cy ad­just­ments, these un­der­ly­ing weak­ness­es could con­tin­ue to con­strain sus­tain­able growth and long-term eco­nom­ic re­silience.

At a mid-term eco­nom­ic re­view host­ed by the Trade and Eco­nom­ic De­vel­op­ment Unit of the St Au­gus­tine cam­pus of The UWI last Fri­day, econ­o­mists Dr Daren Con­rad, Dr In­dera Sage­wan, Pro­fes­sor Roger Ho­sein of­fered a sober­ing as­sess­ment of an econ­o­my caught be­tween short-term macro­eco­nom­ic sta­bil­i­ty and long-term stag­na­tion, warn­ing that un­less de­ci­sive struc­tur­al re­forms are im­ple­ment­ed now, the coun­try risks re­peat­ing fa­mil­iar boom-and-bust cy­cles even as new en­er­gy rev­enues loom on the hori­zon.

The dis­cus­sion was framed by grow­ing con­cerns over the Cen­tral Bank’s re­cent as­sess­ment that eco­nom­ic growth is slow­ing, dri­ven large­ly by weak­ness in the non-en­er­gy sec­tor.

While that nar­ra­tive may ap­pear in­tu­itive, the pan­el­lists ar­gued that it masks more fun­da­men­tal ques­tions about whether T&T is ex­pe­ri­enc­ing a tem­po­rary cycli­cal slow­down or a pro­longed pe­ri­od of struc­tur­al stag­na­tion.

With in­ter­na­tion­al volatil­i­ty ris­ing, for­eign ex­change pres­sures per­sist­ing and in­vest­ment con­fi­dence sub­dued, they con­verged on a cen­tral mes­sage: sta­bil­i­ty alone is no longer enough.

Con­rad de­scribed the present eco­nom­ic con­di­tion as one of “frag­ile sta­bil­i­ty” cau­tion­ing that while many key in­di­ca­tors re­main with­in ac­cept­able ranges, the econ­o­my lacks re­silience.

“It’s sta­ble but it is a frag­ile kind of sta­bil­i­ty and it’s a very soft sta­bil­i­ty. Mean­ing that I don’t think there’s room for any shock,” Con­rad said.

He point­ed to the glob­al back­drop as a ma­jor source of risk, de­scrib­ing the in­ter­na­tion­al econ­o­my as in­creas­ing­ly frag­ile amid geopo­lit­i­cal con­flict and volatile en­er­gy mar­kets.

Ris­ing oil prices, he warned, could quick­ly trans­late in­to high­er trans­porta­tion costs, im­port in­fla­tion and fur­ther pres­sure on lo­cal con­sumers.

“Even if the war end­ed, that price would would stick around un­til some time in Sep­tem­ber. So we’re look­ing at a sig­nif­i­cant in­crease in move­ment of goods via trans­porta­tion costs and move­ment of peo­ple via air­fares be­cause air­fares have al­ready in­creased sig­nif­i­cant­ly. So things seem to be very, very frag­ile in terms of the glob­al eco­nom­ic out­look,” he warned.

Do­mes­ti­cal­ly, Con­rad said signs of weak­ness are al­ready ev­i­dent in con­sumer be­hav­iour.

Re­tail sales have been con­tract­ing since the third quar­ter of 2025, a trend that has con­tin­ued in­to ear­ly 2026.

This, he ar­gued, is par­tic­u­lar­ly con­cern­ing in an econ­o­my where do­mes­tic de­mand plays a cen­tral role.

“Low re­tail sales tell me a lot of things, in­clud­ing that con­sumers are not spend­ing. Ei­ther they’re not spend­ing be­cause they don’t have or they’re be­ing very cau­tious and they’re not very op­ti­mistic or con­fi­dent about the fu­ture po­si­tion of the econ­o­my,” Con­rad ex­plained.

Con­rad al­so ques­tioned whether new tax­a­tion mea­sures un­der con­sid­er­a­tion could fur­ther damp­en de­mand, warn­ing that ad­di­tion­al bur­dens on house­holds and small busi­ness­es could deep­en the slow­down.

While un­em­ploy­ment re­mains rel­a­tive­ly low at around 4.8 per cent, Con­rad stressed that labour mar­ket da­ta must be in­ter­pret­ed care­ful­ly. Par­tic­i­pa­tion rates re­main sub­dued, and job cre­ation is con­cen­trat­ed in lim­it­ed ar­eas.

He iden­ti­fied agri­cul­ture, con­struc­tion and trade-re­lat­ed ser­vices as sec­tors with un­tapped po­ten­tial but said in­vest­ment and pol­i­cy fo­cus have not yet aligned to re­alise that growth.

On the fis­cal side, Con­rad ac­knowl­edged that the gov­ern­ment has made some progress in con­sol­i­dat­ing fi­nances, but said the pace has been slow and fis­cal space re­mains nar­row.

Trans­fers and sub­si­dies con­tin­ue to dom­i­nate ex­pen­di­ture with­out gen­er­at­ing pro­duc­tive eco­nom­ic ac­tiv­i­ty.

“We still con­tin­ue along with the same trans­fers and sub­si­dies and I don’t know how long we will be able to con­tin­ue with that. That gen­er­ates no move­ment in the econ­o­my. That’s pret­ty much a a hand­out... it keeps roofs over peo­ple’s head and food in their bel­lies.

In terms of mean­ing­ful eco­nom­ic ac­tiv­i­ty, maybe there should be some thought in terms of how long per­sons would be on sub­si­dies and how long we would be able to take them in­to the fu­ture or di­vert some of those re­sources in­to some of the much need­ed ac­tiv­i­ties that would cre­ate a more sta­ble macro­eco­nom­ic en­vi­ron­ment where they can then get mean­ing­ful jobs,” Con­rad sug­gest­ed.

Boost­ing non-en­er­gy ex­ports

Ho­sein, build­ing on those con­cerns, warned that T&T re­mains trapped in a mod­el of re­silience with­out mo­men­tum, sus­tained large­ly by en­er­gy rev­enues that pre­vent col­lapse but fail to gen­er­ate broad-based growth. “The buffer from en­er­gy keeps the floor from col­laps­ing,” Ho­sein said, not­ing, “but there is no pri­vate-sec­tor en­gine dri­ving the econ­o­my for­ward.”

He high­light­ed the sharp de­cline in labour force par­tic­i­pa­tion as a crit­i­cal con­straint on growth, ar­gu­ing that when large seg­ments of the pop­u­la­tion dis­en­gage from pro­duc­tive em­ploy­ment, over­all out­put and per capi­ta in­come in­evitably suf­fer.

“The con­trac­tion in the labour force par­tic­i­pa­tion rate is strong­ly as­so­ci­at­ed with a slow­down in growth. If you have a sig­nif­i­cant chunk of your peo­ple who are not par­tic­i­pat­ing in the labour force be it that they are in gangs or what­ev­er they go in­to, then ob­vi­ous­ly that’s for each per­son that is not par­tic­i­pat­ing. You lose that per capi­ta con­tri­bu­tion they would have made in terms of work,”

Ho­sein said as he al­so raised alarm over the per­for­mance of non-en­er­gy ex­ports, which he de­scribed as the clear­est in­di­ca­tor of struc­tur­al weak­ness.

Gov­ern­ment pro­jec­tions aim for a US$5 bil­lion in­crease in non-en­er­gy ex­ports by 2030, but Ho­sein said avail­able da­ta sug­gest that to­tal non-en­er­gy ex­ports in 2025 are like­ly to be low­er than in 2024.

“On this road to a US$5 bil­lion in­crease in non-en­er­gy ex­ports by 2030, we are start­ing off with a fall, which means that for us to reach the US$5 bil­lion in­crease, we would have to go to about let’s say US$5.5 bil­lion. That’s not an easy tar­get,” Ho­sein out­lined.

He added the chal­lenge is com­pound­ed by an over­val­ued re­al ef­fec­tive ex­change rate, es­ti­mat­ed at rough­ly 26 per cent above equi­lib­ri­um even af­ter mar­gin­al re­cent ad­just­ments.

This, com­bined with ris­ing in­put costs and the loss of cheap nat­ur­al gas for lo­cal man­u­fac­tur­ers, erodes com­pet­i­tive­ness and lim­its ex­port growth. “You are try­ing to boost non-en­er­gy ex­ports with an over­val­ued ex­change rate. That is a very dif­fi­cult road,” he said.

Tourism, while show­ing mod­est im­prove­ment, re­mains far from trans­for­ma­tive as Ho­sein es­ti­mat­ed that an­nu­al ar­rivals would need to rise from ap­prox­i­mate­ly 380,000 to near­ly three mil­lion tourists to gen­er­ate revenus com­pa­ra­ble to even half of the en­er­gy wind­fall seen in 2022. “That tells you the scale of the chal­lenge,” he cau­tioned.

Look­ing ahead, Ho­sein ac­knowl­edged that new gas projects, in­clud­ing Man­a­tee and po­ten­tial­ly Drag­on, could im­prove the medi­um-term out­look.

How­ev­er, he cau­tioned that these projects would not gen­er­ate the same fis­cal re­turns seen in pre­vi­ous booms due to dif­fer­ences in roy­al­ty arrange­ments, tax­es and in­vest­ment write-offs.

“We can­not as­sume those rev­enues will solve our prob­lems,” he said.

In­stead, Ho­sein ar­gued that the Min­istry of Trade must take the lead in ar­tic­u­lat­ing and com­mu­ni­cat­ing a cred­i­ble strat­e­gy for non-en­er­gy ex­port growth, par­tic­u­lar­ly with­in Cari­com mar­kets where T&T has shown rel­a­tive com­pet­i­tive­ness.

Avoid­ing shocks

“Tar­gets with­out path­ways are mean­ing­less,” he stressed, adding that the pub­lic needs clar­i­ty on how di­ver­si­fi­ca­tion goals would be achieved.

Sage­wan of­fered a de­tailed da­ta-dri­ven as­sess­ment of the eco­nom­ic con­di­tions in­her­it­ed by the cur­rent ad­min­is­tra­tion, sit­u­at­ing the dis­cus­sion with­in both a mid-year bud­get re­view and a broad­er one-year eval­u­a­tion of gov­ern­ment per­for­mance.

She al­so de­scribed an econ­o­my con­strained by per­sis­tent fis­cal deficits, for­eign ex­change short­ages and pro­longed non-en­er­gy sec­tor un­der­per­for­mance.

When the new ad­min­is­tra­tion took of­fice, Sage­wan not­ed, the fis­cal deficit stood at 8.7 per cent of GDP and the non-en­er­gy fis­cal deficit at 24.7 per cent.

Gov­ern­ment rev­enues had con­sis­tent­ly lagged ex­pen­di­ture since 2017, with the sole ex­cep­tion be­ing a tem­po­rary en­er­gy-dri­ven boost in 2022 fol­low­ing the Rus­sia–Ukraine con­flict.

De­spite those con­straints, Sage­wan said the gov­ern­ment de­serves cred­it for sta­bil­is­ing key in­di­ca­tors over the past six months.

Cen­tral Bank da­ta show a fis­cal sur­plus of ap­prox­i­mate­ly TT$126 mil­lion be­tween Oc­to­ber 2025 and Jan­u­ary 2026.

“It is good but it is not doesn’t nec­es­sar­i­ly sing a very healthy song be­cause on both counts of rev­enue and ex­pen­di­ture we saw con­trac­tion. So the pro­ject­ed rev­enue over this pe­ri­od was not re­alised but the ex­pen­di­ture that was pro­ject­ed ac­tu­al­ly fell short,” she stat­ed.

How­ev­er, she cau­tioned that the im­prove­ment does not rep­re­sent fis­cal health not­ing that pub­lic debt has risen from 84 per cent of GDP in Sep­tem­ber 2025 to near­ly 85 per cent by Feb­ru­ary 2026, and pres­sures are like­ly to in­ten­si­fy as gov­ern­ment strug­gles to fi­nance ex­pen­di­ture.

“Gov­ern­ment sim­ply does not have the fis­cal space through rev­enue gen­er­a­tion or through its ca­pac­i­ty to be able to raise mon­ey in any al­ter­na­tive man­ner. And there­fore we are go­ing to see this con­tin­u­ing to raise,” Sage­wan warned.

She ar­gued that sharp ex­pen­di­ture cuts would risk trig­ger­ing a deep­er con­trac­tion, giv­en the gov­ern­ment’s dom­i­nant role in do­mes­tic spend­ing.

Main­tain­ing ex­pen­di­ture around TT$59 bil­lion, she said, was a de­lib­er­ate at­tempt to avoid shock­ing an al­ready frag­ile econ­o­my.

Sage­wan’s sec­toral analy­sis paint­ed a trou­bling pic­ture of the non-en­er­gy econ­o­my as she not­ed da­ta show con­tin­ued con­trac­tion in con­struc­tion, man­u­fac­tur­ing, whole­sale and re­tail trade, and agri­cul­ture through the third quar­ter of 2025.

“The non-en­er­gy sec­tor it con­tract­ed by a mi­nus 1.2 per cent, a fur­ther con­trac­tion,” she added.

Pri­vate sec­tor cred­it has al­so weak­ened.

Sage­wan not­ed that be­tween Oc­to­ber 2025 and Feb­ru­ary 2026, over­all pri­vate sec­tor cred­it growth de­clined from 6.3 per cent to 5.3 per cent, with busi­ness lend­ing falling from 6.8 per cent to 6.6 per cent and con­sumer bor­row­ing drop­ping sharply from eight per cent to 5.6 per cent.

“We need busi­ness­es to be bor­row­ing for in­vest­ment,” Sage­wan said adding, “Flat cred­it re­flects low con­fi­dence.”

Sage­wan con­clud­ed by echo­ing a cen­tral theme of the fo­rum: that while the gov­ern­ment has sta­bilised the econ­o­my, the hard work lies ahead.