For a nation bracing for economic pain, brought about largely by COVID-19, Finance Minister Colm Imbert had some encouraging news when he presented the Mid-Term Budget Review yesterday. In a nutshell, T&T has weathered the storm and is in a good financial position.
To be clear, the country was already in some choppy economic waters, the result of a 50 per cent decline in natural gas prices and collapse in oil prices. Then came the pandemic and a halt to all non-essential activities as public health restrictions were enforced to safeguard against spread of the virus.
COVID-19 was the recurring theme throughout Mr Imbert’s presentation, which included details of expenditure on a range of relief measures to cushion the worst of the pandemic.
But while it is true that, so far, the country has escaped catastrophic public health and economic outcomes, Mr Imbert’s optimistic stance might be premature. The world is not rid of COVID-19, a cure has not yet been found and expected new waves of the pandemic could once again halt economic activity.
Like so much in this strange new era of lockdowns and physical distancing, uncertainty is the only thing that is certain in the months ahead.
One of the few facts that can be gleaned from current economic projections is that T&T now sits as a developing country, a small player in a global economy expected to contract by three per cent this year.
Even worse, the forecast is for a global recession that is shaping up to be worse than the 2009 global financial crisis.
This year, T&T will suffer a 2.4 per cent decline in GDP. Total revenue is down by approximately $9.200 billion, mainly due to lower than expected oil and gas prices. As a result, the country is saddled with a deficit of $14.533 billion—8.8 per cent of GDP.
While, to a certain degree, T&T has dodged some really bad outcomes, the worst is not yet over, so there will be a need for a lot more of the fiscal prudence Minister Imbert regularly refers to in his budget presentations.
Austerity might be a dirty word for a government just months away from a general election but it is a consequence that can only be avoided if, in budgetary measures for the immediate future, care is taken with expenditure.
The same degree of extreme caution observed with the resumption of activities in recent weeks will have to be followed in managing the economy.
As much as possible, drawdowns of the Heritage and Stabilisation Fund (HSF) must be avoided. Great care should also be taken in accessing the funding available from multilateral agencies, including the low-cost funding rapid financing instruments made available by the International Monetary Fund (IMF).
The one thing that needs to be aggressively pursued is the development of those sectors of the economy already identified as pillars of the long-overdue diversification that will break decades of dependence on our energy industry.
This is necessary to ensure T&T survives future economic storms.