One economist says the Central Bank’s July Economic Bulletin does not provide sufficient information to comfortably predict that there would be any significant improvement in the energy and non-energy sectors as fiscal 2023 draws to a close.
The Economic Bulletin, which was published by the Central Bank on Monday, said the economic activity in this country is expected to improve this year, bolstered by activity in both the energy and non-energy sectors.
The bulletin stated that natural gas supplies should continue to benefit from key upstream energy sector projects such as Shell Trinidad and Tobago’s Colibri, DeNovo’s Zandolie, and bpTT’s Cassia Compression and that the non-energy sector performance will be driven by increased business activity and the continued resurgence of consumer demand.
In an interview with Business Guardian on Tuesday, economist Dr Marlene Attzs said while the Economic Bulletin provided a useful update on the prevailing macro-economic conditions, there was a recent statement from Energy Chamber President, Dr Dax Driver, about the urgent attention needed to address bottlenecks in the energy sector and the caution that if “… we do not get our act together soon this country’s economy is going to contract ‘hugely’ and the standard of living for the entire population will plummet.” (See page 11)
Attzs said Driver’s comments coupled with the data coming out of the Central Bank suggest to her that it might be overly optimistic to expect any significant improvement for the energy and non-energy sectors for the remainder of 2023.
Asked if she thinks the recent economic reading of the T&T economy will influence Finance Minister Colm Imbert’s upcoming budget, the economist said it is left to be seen how the minister treats the interplay of activity in the energy and non-energy sectors in his budget presentation for fiscal year 2024.
“I do suspect however that the Minister will focus on the fact that there was a surplus of $88.0 million in the first nine months of fiscal year (FY) 2022/23, albeit a lower surplus from a year earlier.”
That aside, Attzs indicated that she would like to see more tangible provisions made to ease the pressure on the average citizen.
“The population continues to experience a higher cost of living with a reduced quality of life, exacerbated by the growing crime scourge. Added to all this, there are looming additional issues such as property tax and utility rate increases which will undoubtedly continue to impact negatively on many citizens, especially persons in the lower income strata,” she emphasised.
The Central Bank stated headline inflation decelerated to reach 10.1 per cent in June 2023 from a high of 17.3 per cent in January 2023. Core inflation fell to 4.8 per cent in June 2023 from 6.1 per cent in January 2023, as price increases in most sub-indices eased.
According to Attzs, the deceleration of headline inflation will hopefully trickle down to and benefit the population in terms of the lower food prices faced by consumers. This could provide much-needed relief for households and businesses.
Attzs said since the CBTT has maintained its repo rate for the past three years, she suspects that interest rates are unlikely to change at this time notwithstanding any deceleration of headline inflation citizens may see.
As it pertains to the indicators that suggest that domestic activity dipped in the fourth quarter of 2022 but improved over the first quarter of 2023, Attzs said if the economy continues to be primarily dependent on the energy sector as its main source of domestic economic activity, then the volatility in that sector will be reflected in the domestic indicators from time to time.
“The economic resilience required to manage those “dips” can only be achieved if there is growth in the non-energy sector – back to the diversification and ease (and cost) of doing business conversations,” she said.
The Central Bank stated that the unemployment rate measured 4.9 per cent in the first quarter of 2023, slightly lower than the 5.1 per cent recorded in the same period one year earlier.
“The number of persons with jobs decreased by 8.1 thousand persons (year-on-year), while the number of persons without jobs and seeking employment (“the unemployed”) fell by 1.6 thousand persons. Additionally, a contraction of the labour force (9.7 thousand persons) contributed to a decline in the labour force participation rate to 55.2 per cent in the first quarter of 2023, as compared to 55.9 per cent in the comparable quarter of 2022,” the bulletin further stated.
Weighing in on these statistics, the economist said the unemployment rate is a measure of the number of unemployed people who are actively looking for a job.
“Persons who are either underemployed or have become discouraged and stopped looking for work will not be captured in the unemployment rate.
Achieving a lower unemployment rate requires an accelerated rate of real economic growth to ensure more people can be gainfully (and suitably) employed. In our situation, employment must come from both the energy and non-energy sectors and driving public and private sector employment opportunities,” she outlined.
According to the Economic Bulletin, the general government debt grew by $925.6 million to $140.3 billion in the period October 1, 2022 to June 30, 2023.
Adjusted general government debt outstanding (which excludes debt issued for sterilisation purposes) also increased to $134.6 billion (68.2 per cent of GDP) at the end of June 2023 from $129.7 billion (66.5 per cent of GDP) recorded at the end of September 2022.
Central government domestic debt (excluding sterilised debt) reached $70.0 billion (35.5 per cent of GDP) at the end of June 2023 from $66.2 billion (33.9 per cent of GDP) at the end of September 2022.
The Central Bank reported that global economic performance will likely continue to be impacted by the effects of restrictive monetary policy, heightened financial stress, and ongoing geopolitical tensions.
Notwithstanding uncertainty surrounding the prospects for global growth, the International Monetary Fund (IMF), in its July 2023 World Economic Outlook (WEO) Update, forecasts global economic growth of 3.0 per cent in 2023, 0.2 per cent higher than its forecast in April 2023.
The July Economic Bulletin added that the upward revision largely reflects stronger-than-expected growth in the first quarter of 2023 driven by the services sector.