Mar­i­ano Browne

The glob­al eco­nom­ic out­look is cloud­ed by the cur­rent mil­i­tary stale­mate in the Mid­dle East. The path­way to a “deal” looks slip­pery as Is­rael flouts the cease­fire by bat­ter­ing Lebanon, and the US at­tacked Iran­ian po­si­tions this week in “self-de­fence”. The volatil­i­ty in glob­al oil prices re­flects mar­ket ef­forts to price the du­ra­tion of Strait of Hor­muz clo­sure. The longer this per­sists, the worse the glob­al sup­ply short­fall grows. The po­ten­tial is for en­er­gy prices and re­lat­ed de­riv­a­tives to rise much fur­ther if the Strait of Hor­muz re­mains closed for an ex­tend­ed pe­ri­od.

The scale of the sup­ply short­fall is now well-known to mar­kets. But the time­line for when tem­po­rary buffers run out, and how this in­ter­acts with prices, is un­known. Per­ma­nent dam­age has been done to equip­ment and fa­cil­i­ties in the Gulf States. Re­pairs will take a long time, so short­ages will per­sist even when the strait is opened. That slip­pery slope adds to glob­al un­cer­tain­ty and over­shad­ows T&T’s eco­nom­ic out­look.

The IMF’s May 17 re­marks on its Ar­ti­cle IV con­sul­ta­tion with T&T con­clud­ed that the near-term (12-month) eco­nom­ic out­look for T&T is cloud­ed by glob­al un­cer­tain­ty. It al­so sug­gest­ed that de­lays in new en­er­gy projects or dis­rup­tions to pro­duc­tion from ma­ture fields could weigh on growth. The IMF sig­nalled that faster im­ple­men­ta­tion of re­forms un­der the Re­vi­tal­i­sa­tion Blue­print and sus­tained in­vest­ment could lift medi­um-term growth prospects.

The re­port point­ed to sev­er­al pos­i­tives. First, the bank­ing sec­tor re­mains well cap­i­talised, and cred­it growth is steady. Sec­ond, In­fla­tion is low but is ex­pect­ed to rise to 3.1 per cent, re­flect­ing “glob­al com­mod­i­ty price de­vel­op­ments, be­fore sta­bil­is­ing around 2 per cent over the medi­um term.” Third, high­er en­er­gy prices should boost gov­ern­ment tax rev­enues and for­eign ex­change re­serves (“ex­ter­nal bal­ances”). Fourth, “new en­er­gy projects com­ing on stream un­der­pin a grad­ual im­prove­ment in the fis­cal and ex­ter­nal po­si­tions over the medi­um term.”

These new projects are not iden­ti­fied. We know that Shell is go­ing ahead with the Man­a­tee project. It is es­ti­mat­ed to con­tribute 604 mil­lion cu­bic feet of nat­ur­al gas per day in mid-2027. Men­to (EOG & bpTT) ini­tial well is pro­duc­ing, but oth­er wells have not been com­plet­ed. Al­though pri­ori­tised, bpTT Man­akin/Couci­na is not at the drilling stage. There has been no fi­nal in­vest­ment de­ci­sion on Wood­side’s Ca­lyp­so project. Drag­on re­mains in abeyance, await­ing a thaw in the frigid re­la­tion­ship with Venezuela.

The dif­fi­cul­ty is that pro­duc­tion from old­er wells is al­so de­clin­ing, mak­ing this a race against time: drilling new, high­er-pro­duc­ing wells to sup­ple­ment the de­cline in old­er wells. In the in­ter­im, NGC has no gas for Nu­trien, and, de­spite the fan­fare, can on­ly con­firm a gas sup­ply to Pro­man Methanol Hold­ings through De­cem­ber 31.

This is a very dicey sit­u­a­tion, which ex­plains the weak 2026 growth fore­cast of 0.8 per cent. This growth is pred­i­cat­ed on the per­for­mance of the non-en­er­gy sec­tor, as pro­jec­tions for the en­er­gy sec­tor in­di­cate a 4.5 per cent de­cline in 2026. Giv­en the fore­go­ing, the IMF calls for fis­cal re­straint, “a stronger sus­tained fis­cal con­sol­i­da­tion ef­fort”, and the need “to place pub­lic debt on a cred­i­ble down­ward path.”

The ad­vice of pre­vi­ous re­ports is re­peat­ed as the need for “a medi­um-term fis­cal frame­work an­chored by a well-de­signed fis­cal rule and a cred­i­ble debt an­chor to man­age volatile en­er­gy rev­enues and en­sure in­ter­gen­er­a­tional eq­ui­ty.” Sim­i­lar ad­vice is re­peat­ed for the for­eign ex­change sys­tem, call­ing for “greater ex­change rate flex­i­bil­i­ty.”

The fi­nance min­is­ter is in a fis­cal bind. The agree­ments with the pub­lic sec­tor unions can­not be ac­com­mo­dat­ed with­in ex­ist­ing fis­cal re­sources with­out fur­ther bor­row­ing. Ad­di­tion­al bor­row­ing adds pres­sure to the coun­try’s cred­it rat­ings. This ex­plains why the CPO has dou­bled down on his of­fer to set­tle the back­pay en­ti­tle­ments cre­at­ed by the union agree­ment, com­bin­ing cash and non-cash items.

Oth­er risks that af­fect fu­ture eco­nom­ic con­di­tions are not men­tioned in the IMF state­ment. A new re­port from the World Me­te­o­ro­log­i­cal Or­gan­i­sa­tion (WMO) Glob­al An­nu­al to Decadal Cli­mate Up­date 2026-35 in­di­cates that av­er­age tem­per­a­tures are like­ly to con­tin­ue at or near record lev­els in the next five years. Dr David Far­rell, Prin­ci­pal of the Caribbean In­sti­tute for Me­te­o­rol­o­gy and Hy­drol­o­gy (CIMH), on Wednes­day warned the re­gion to brace for high­er en­er­gy costs amid the threat of ex­treme heat dur­ing the 2026 At­lantic hur­ri­cane sea­son, which be­gins in June.

Drought con­di­tions al­so af­fect agri­cul­tur­al pro­duc­tion and food se­cu­ri­ty, adding to oth­er de­mands, com­pli­cat­ing the fis­cal pic­ture as Caribbean coun­tries are de­pen­dent on im­port­ed food and im­port­ed en­er­gy.

It is com­fort­ing to be­lieve, or hope, that high­er en­er­gy prices caused by events in the Mid­dle East or a dis­cov­ery of new gas de­posits will res­cue T&T’s eco­nom­ic for­tunes. His­to­ry is less re­as­sur­ing. En­er­gy prices rose in 2022-23 with on­ly a short-term ef­fect. In 2018, An­gelin and Ju­niper tem­porar­i­ly in­creased gas pro­duc­tion. Nei­ther de­vel­op­ment re­versed the in­crease in pub­lic debt or the de­cline in for­eign ex­change re­serves. To achieve sus­tain­able de­vel­op­ment, T&T must forge a braver path.

Mar­i­ano Browne is the Chief Ex­ec­u­tive Of­fi­cer of the Arthur Lok Jack Glob­al School of Busi­ness