Several economists have agreed with Prime Minister Dr Keith Rowley that T&T’s economy has difficult years ahead.
Professor emeritus of the University of the West Indies (UWI) Patrick Watson, who is an economist, is not optimistic that the country’s economic fortunes will recover by the year 2027.
Watson spoke at a post-budget webinar hosted by the Central Finance Facility (CFF), which is the developmental and financial institution of the cooperative movement.
In September, the Prime Minister spoke of the future of T&T’s gas industry at Atlantic’s 25th anniversary and restructuring celebrations at Clifton Hill, Point Fortin,
With low current levels of natural gas production and a less than favourable market, the Prime Minister said there would be difficult times for T&T until new gas production in 2027.
Watson explained his position.
“The Government seems to think we will have some luck by 2027. I am not as optimistic as the Government of T&T in that regard. The price of oil and gas, we have no impact on that. It is something that is determined elsewhere and those are our main levers for economic development. We live in a world that is uncertain and I have never lived in such a period of uncertainty, including doomsday uncertainty, if you are following what is happening in the Middle East. The credit union movement cannot ignore any of these when it comes to a sustained programme of economic recovery,” Watson said.
He also spoke about how unstable oil and gas prices impact T&T’s vulnerable economy.
“The economic fluctuations in our country are linked to the fortunes of the hydrocarbon sector and that is likely to be so for a long time to come. Although there has always been talk that should not be so and true economic recovery can only come in the near future if the fortunes of the hydrocarbon sector change and that is irrespective of the budget. T&T crucially depends on foreign exchange. It can do very little without foreign exchange.”
He said even if energy prices increase it is unlikely that T&T will respond with the quantities to make a difference in economic development.
“We are at 40,000 barrels of oil a day, which no matter of how many of those barrels we sell, at whatever price, it is not going to help us a lot. The participation of the credit union movement is important in the diversification of the economy. I have been hearing about that since I was in my mother’s womb and it has never happened and we always say God will provide for us. We cannot count on God anymore to do these kinds of things.”
He said Artificial Intelligence (AI), climate change, global wars, increasing food prices, potential food shortages, increasing inequality worldwide and a changing world order are factors that will affect T&T’s economic development.
“The credit union movement cannot be indifferent to this environment. AI is threatening jobs worldwide. There is also climate change which is a threat to all of us. Iran launched attacks on Israel. There is a possibility we could get a windfall as this will affect energy prices as the Ukraine war did in its early days. There are the BRICS countries and they are having greater influence in the developing world.”
Watson encouraged credit unions and the co-operative movement to make a contribution to the diversification of the economy.
“The best time would have been in the 1960s but the second best time is now. When we talk about diversification of the T&T economy it must not be to produce that will require the use of foreign exchange. It must be products and services that generate foreign exchange because the oil and gas sector is failing us and will continue to fail us.”
He harshly criticised the business sector for relying on the old model of importing goods and selling locally instead of coming up with innovative ways to generate foreign exchange.
“I understand the agony of businessmen when they say they want foreign exchange. The foreign exchange generated by bpTT and Atlantic LNG. They want that to put goods in their big shops. When you are earning your living off the source that others are responsible for, you are playing with fire. It cannot last. You cannot continue buying goods and services from abroad and I am not saying that you must stop. The only way you can do that is to earn the foreign exchange and that requires diversification of the economy.”
There are actions that the credit union can undertake to help steer the country away from the path it is on, he added.
“In recent times, large agriculture producers like India have been holding back on their exports of rice as they need that rice. I want to suggest and I have done this with the credit union movement before, T&T is too small to talk about food security and it is not going to happen, especially if people think that in a crisis people think that we will feed ourselves. Food security is measured in how long you can feed yourself for. We do not have a great tradition in agriculture in T&T.”
He described the increase in the public sector minimum wage as a “vote catching” measure which will only hurt the agriculture sector.
“What is that going to do? That will impact on agriculture as it has already done over time. This makes the cost of agriculture labour more expensive as fewer and fewer people will go into agriculture. We have to find ways and the credit union movement is capable of trying to find activity beyond the shores of T&T in collaboration with your credit union brothers and sisters. We can work with countries like Guyana and others with the expertise.”
Economist Ronald Ramkissoon, who also spoke during the webinar, pointed out that the fiscal policy is just one instrument that the Government uses to manage a country’s finances. Other instruments include trade policies and exchange rate policies.
He said fiscal deficits have been recorded for the last 11 out of 14 years and this reflects that the country’s finances have not been managed well.
“This means that as a country, we have been living beyond our means for many years. We borrow from abroad and borrowing internally and from time to time we dispose of assets to help us meet that deficit that we have been talking about.”
He said notwithstanding T&T’s “cantankerous” society, one issue that all stakeholders can agree on is that the country does not have the oil and gas resources and the income the country once had..
“The 2025 budget now pins our hopes on imports of gas from Venezuela in 2027 and beyond. I observe that not only our current circumstances are very challenging, it is likely to be so for at least the next three years as indicated by our Prime Minister and by our Minister of Finance. Further because of global overheating, the world is now shooing us away from fossil fuel and into a greener economy. We seem not to be anxious to be shooed away. Notwithstanding our relatively good fortunes over the last 62 years and more, a myriad of luxury imports, double digit wage increases, subsidies for all…we have to admit that of now, we are not at a comfortable enough place.”
He blamed “weak policies” from successive administrations for the serious problems T&T now faces.
“It is what we chose to do with our windfall that has put us in this position. It is a blessing if you win the lotto but it can be a curse if you spend it badly. I encourage the credit union movement and the entire society in terms of the next few years which I consider a squeeze, to rethink, retool and strategise for the years ahead.”
