The T&T economy is in an unusual place at the start of 2010. After 15 consecutive years of growth, the economy has come to a halt, bringing inflation down and with it the appetite of many in the country for the risk that comes with borrowing money. Along with an inflation rate of 1.5 per cent, the country has billions of dollars on deposit in local banks. Given the economic environment, the start of 2010 would seem to be a very good time for some entrepreneurs with a vision of where the local economy can be in the next ten years to step forward in the way that Anthony Sabga and Lawrence Duprey stepped forward during the last recession to fashion financial empires.
As far as the international environment goes, the signs seem propitious for a recovery in the local economy. It should be recalled that the 2010 budget was predicated on oil and natural gas price assumptions of US$55 per barrel for oil and a gas price of US$2.75 per million cubic feet. The budget planners expected that those prices, over which this country has little control, along with growth rate of two per cent and an inflation rate of seven per cent, would result in revenue to the State of $36.6 billion. As 2009 came to a close, the price of crude oil remained above US$75 a barrel and the natural gas futures price ended 2009 at US$5.70 per unit. T&T's other main energy exports–ammonia, methanol, urea and steel prices–were all selling on the international market toward the end of last year at prices well above their lows 12 months earlier.
If an index of T&T main export earners were to be constructed based on a gas tank indicator–with the peak reached in July 2008 being full and the trough experienced one year ago being empty–it would have to be said that the country's gas tank is more than half full. It should be pointed out that the Government's fiscal performance for the 2009 fiscal year, which ended in September 2009, was initially based on a weighted average oil price of US$70 per barrel and a natural gas price of US$4 per thousand cubic feet (mcf) which would have resulted in revenue estimated at $49.5 billion. At today's export prices, therefore, the projected fiscal deficit of $7.5 billion would turn into a small surplus. This would mean that the Government would not be required to raise bonds in order to close the gap between spending and revenues, as it was required to do last year.
While it may be argued that today's prevailing energy prices of US$79 a barrel of oil and US$5.70 a unit of natural gas may be largely due to temporary factors such as the bitterly cold weather being experienced by the temperate countries, it is also significant to note that today's prices can be viewed against the backdrop of what can only be described as the anaemic US economic recovery. Real gross domestic product increased at an annual rate of 2.2 per cent in the third quarter compared with the second quarter. In the second quarter, real GDP in the US had declined by 0.7 per cent. If the US economy picks up steam this year–which is not unlikely given the amount of stimulus that has been applied in the US–it is a very safe bet that the prices of all of T&T's main energy exports would rise. If that happens, it is hoped that the Government would have learnt some lessons from its management of the last natural gas windfall.
