In Wash­ing­ton DC at the IMF/World Bank au­tumn meet­ings

The In­ter­na­tion­al Mon­e­tary Fund (IMF) is pre­dict­ing a mixed re­turn for coun­tries like Trinidad and To­ba­go, which are re­liant on the en­er­gy sec­tor.

In the lat­est World Eco­nom­ic Re­port, re­leased on Tues­day dur­ing the IMF's an­nu­al meet­ing in Wash­ing­ton DC, the IMF said pro­vid­ed an out­look for en­er­gy prices in which it pre­dict­ed that oil prices are ex­pect­ed ex­pe­ri­ence a small in­crease, while nat­ur­al gas prices are ex­pect­ed to fall in 2024.

The re­port stat­ed, "Oil prices are ex­pect­ed to rise by 0.9 per cent in 2024 to about US$81 a bar­rel as pro­duc­tion cuts by OPEC+ (Or­ga­ni­za­tion of the Pe­tro­le­um Ex­port­ing Coun­tries plus se­lect­ed non-mem­ber coun­tries, in­clud­ing Rus­sia), sus­tained glob­al oil de­mand growth, and geopo­lit­i­cal ten­sions in the Mid­dle East off­set strong non-OPEC+ sup­ply growth.

"Over­all, how­ev­er, prices for fu­el com­modi­ties are pro­ject­ed to fall on av­er­age by 3.8 per cent—ow­ing to de­clines in prices of nat­ur­al gas (by 16.4 per cent) and coal (by 18.0 per cent) as they come off their 2022 peaks—but less rapid­ly than as­sumed in April."

This sug­ges­tion has large­ly sup­port­ed the state­ments made by Prime Min­is­ter Dr Kei­th Row­ley and Fi­nance Min­is­ter Colm Im­bert that the next two to three years may be chal­leng­ing, giv­en Trinidad and To­ba­go's eco­nom­ic re­liance on nat­ur­al gas rev­enues.

Slow­er glob­al growth

De­spite a faster-than-ex­pect­ed pe­ri­od of re­cov­ery af­ter the COVID-19 pan­dem­ic, the glob­al pro­jec­tion of low growth for the short to medi­um term has mem­bers of the In­ter­na­tion­al Mon­e­tary Fund (IMF) con­cerned.

It was re­vealed that while gen­er­al­ly in­fla­tion had been on the de­cline there con­tin­ued to be ris­es in food prices, main­ly due to ex­ter­nal fac­tors.

The re­port said, "Since the be­gin­ning of 2024, signs that cycli­cal im­bal­ances are be­ing grad­u­al­ly re­ab­sorbed have helped bring in­fla­tion rates across coun­tries clos­er to­geth­er. Dis­in­fla­tion has con­tin­ued broad­ly as ex­pect­ed but did show signs of slow­ing in the first half of the year, sug­gest­ing po­ten­tial bumps on the road to price sta­bil­i­ty (Ju­ly 2024 World Eco­nom­ic Out­look Up­date). The per­sis­tence in core in­fla­tion has been dri­ven pri­mar­i­ly by ser­vices price in­fla­tion. "

The re­port con­tin­ued, "At 4.2 per cent, core ser­vices price in­fla­tion is about 50 per cent high­er than be­fore the pan­dem­ic in ma­jor ad­vanced and emerg­ing mar­ket economies (ex­clud­ing the US). This con­trasts with core goods price in­fla­tion, which has de­clined all the way to ze­ro. Re­cent in­creas­es in ship­ping rates, es­pe­cial­ly for routes to and from Chi­na, have put up­ward pres­sure on goods prices. How­ev­er, this source of up­ward pres­sure has been mit­i­gat­ed so far by de­clin­ing prices for ex­ports from Chi­na"

Pierre-Olivi­er Gour­in­chas, eco­nom­ic coun­sel­lor and di­rec­tor of the Re­search De­part­ment at the IMF, ex­plained that in many cas­es this surge in prices was as a re­sult of geopo­lit­i­cal is­sues.

"The things that we are wor­ried about, the things that we're look­ing at close­ly. First of course, geopo­lit­i­cal risks, whether it's in­crease in frag­men­ta­tion tar­iffs, whether it's ten­sions in the Mid­dle East that would re­sult in es­ca­la­tion of com­mod­i­ty prices, oil prices, ship­ping costs. That's some­thing that we are con­cerned about.

"Sec­ond, now cen­tral banks are start­ing to ease the pol­i­cy rate in many parts of the world. They could do it, but maybe the pace could be wrong. They could stay high­er too long, and then eco­nom­ic ac­tiv­i­ty would start their pay. So we have a down­side risk al­so here, re­lat­ed to how ap­pro­pri­ate this is go­ing to be the path of dis­in­fla­tion and eas­ing pol­i­cy rates," said Gour­in­chas, in a press brief­ing on the re­port on day 1 of the an­nu­al meet­ing on Mon­day.

Speak­ing about the glob­al econ­o­my, Gour­in­chas ex­pressed con­cern about the slow rate of growth af­ter, in most cas­es, a bet­ter-than-ex­pect­ed bounce back af­ter the pan­dem­ic.

"Yes, growth has been re­silient, 3.2 per cent but we are ex­pect­ing growth in the medi­um term, " he said, "When you look fur­ther out, when we look at 2029 we're ex­pect­ing growth to re­main at about the same lev­el, maybe a tad small­er, about 3.1 per cent and 3.1 per cent is not a good num­ber for us."

Gour­in­chas said those fig­ures com­pared un­favourably to pre­vi­ous decades where there had been promis­ing de­vel­op­ment, sug­gest­ing that many economies could find them­selves stalled.

"If you look at the av­er­age growth rate for the first two decades of the cen­tu­ry, it was clos­er to 3.8 per cent. So a re­duc­tion to 3.1 per cent sug­gests that the glob­al econ­o­my is not grow­ing as rapid­ly, and that's go­ing to be an is­sue for fund­ing need­ed ex­pens­es, whether it's re­lat­ed to cli­mate change, whether it's re­lat­ed to de­vel­op­ment goals, etc, so it's go­ing to con­strain a lot of things to have low­er medi­um-term growth," he said.

Gour­in­chas said this is­sue would have to be ad­dressed with eco­nom­ic pol­i­cy changes to help spur growth.

"The first piv­ot has al­ready start­ed. It's on mon­e­tary pol­i­cy. In many coun­tries, they've start­ed to cut pol­i­cy rates, and that should con­tin­ue, ap­pro­pri­ate­ly cal­i­brat­ed again, de­pend­ing on how in­fla­tion is go­ing to con­tin­ue to come down, " Gour­in­chas said.

"The sec­ond piv­ot is on fis­cal pol­i­cy. We are mov­ing from a pe­ri­od where there was tight mon­ey, but rel­a­tive­ly easy fis­cal pol­i­cy, lot of spend­ing to sup­port ac­tiv­i­ty and house­holds, etc. We need to move to the op­po­site con­fig­u­ra­tion. Mon­e­tary pol­i­cy is go­ing to ease, come back to neu­tral, but now we need to re­build the fis­cal ef­forts. And that is com­pli­cat­ed. It is dif­fi­cult to do, but it's ab­solute­ly nec­es­sary in many coun­tries, so that they can face fu­ture chal­lenges."

"And the third piv­ot is to­wards poli­cies that will sup­port growth, whether that means im­prov­ing hu­man cap­i­tal, whether that means im­prov­ing gov­er­nance, whether that means im­prov­ing or deep­en­ing eco­nom­ic in­te­gra­tion. There are many di­men­sions here. It's very coun­try spe­cif­ic. Not one recipe for all, but more needs to be done so that we can move away from the 3.1 per cent I de­scribed and back to­wards some­thing that is a bet­ter growth num­ber in the medi­um term," he closed.

De­clin­ing growth in LAC

Ac­cord­ing to the re­port, In Latin Amer­i­ca and the Caribbean, growth is pro­ject­ed to de­cline from 2.2 per cent in 2023 to 2.1 per cent in 2024 be­fore re­bound­ing to 2.5 percent in 2025.

The re­gion's growth out­look is among the low­est in emerg­ing Mar­kets and de­vel­op­ing economies world­wide.

Con­verse­ly the re­port did in­di­cate some pos­i­tives as it pro­ject­ed that "Food prices are ex­pect­ed to de­cline by 5.2 per cent in 2024 and by a fur­ther 4.5 per cent in 2025 as glob­al grain pro­duc­tion is fore­cast to reach record highs in 2024–25"

Ad­di­tion­al­ly, the re­port said that glob­al trade as a share of world GDP has not de­te­ri­o­rat­ed.

How­ev­er, the IMF has stat­ed its con­cern about the po­ten­tial of geoe­co­nom­ic frag­men­ta­tion as more trade has start­ed oc­cur­ring with­in geopo­lit­i­cal blocs.

The re­port said, "Specif­i­cal­ly, when the av­er­ages for the pe­ri­ods 2017 to 2022 and 2022 to the first quar­ter of 2024 are com­pared, goods trade growth is ob­served to have de­clined by ap­prox­i­mate­ly 2½ per­cent­age points more be­tween geopo­lit­i­cal­ly dis­tant blocs than with­in blocs."

The re­port said this could lead to a more frag­ment­ed glob­al trade land­scape if geopo­lit­i­cal ten­sions con­tin­ue to de­vel­op.

This, the re­port warned, could im­pact sup­ply chains, in­crease fund­ing costs, dis­rupt cross-bor­der cap­i­tal flows and low­er mar­ket ef­fi­cien­cy. Ad­di­tion­al­ly, the re­port said, it could lead to the slow­er trans­fer of knowl­edge be­tween ad­vanced and emerg­ing mar­ket and de­vel­op­ing economies which would ham­per in­come con­ver­gence, in­crease costs and risks for busi­ness­es, and in­duce a larg­er eco­nom­ic cost for the green tran­si­tion.