GEISHA KOW­LESSAR-ALON­ZO

With en­er­gy sec­tor rev­enue not pro­ject­ed to in­crease sub­stan­tial­ly, the for­eign ex­change mar­ket is ex­pect­ed to re­main very tight over the next two years, while gov­ern­ment’s fis­cal con­straints are en­vis­aged to linger. In this re­gard, the thrust to com­plete and gain sig­nif­i­cant mo­men­tum in key pub­lic projects in 2025 could re­sult in a larg­er fis­cal deficit than the 2.9 per cent of GDP pro­ject­ed in the 2025 bud­get, while pub­lic debt could rise fur­ther.

This is the fore­cast of Garvin Joe­field, econ­o­mist at Re­pub­lic Bank Ltd dur­ing an in­ter­view with the Busi­ness Guardian.

In shar­ing fur­ther thoughts on what the T&T econ­o­my could look like in 2025, Joe­field said over­all, re­al GDP is ex­pect­ed to grow by 2.4 per cent in 2025 but it could re­main be­low pre-pan­dem­ic lev­els.

“The per­for­mance of the en­er­gy sec­tor is ex­pect­ed to im­prove slight­ly in 2025 with new gas out­put sched­uled to come on­stream dur­ing the year. This in­cludes the joint ven­ture be­tween EOG Re­sources (EOG) and bpTT, tar­get­ting the Teak, Samaan and Poui, Men­to and Reg­gae acreages (Feb­ru­ary 2025), bpTT’s Cypre project (March 2025) and new out­put from Touch­stone Ex­plo­ration’s Cas­cadu­ra field (Au­gust 2025),” he said.

Ac­cord­ing to Joe­filed, amid a de­cline in pro­duc­tion from ma­ture fields, these projects may help to slow the con­trac­tion, even as they are not ex­pect­ed to cause a sig­nif­i­cant in­crease in gas pro­duc­tion.

In this re­gard, they could pro­vide a tem­po­rary ease as the coun­try looks for­ward to de­vel­op­ing the larg­er gas re­serves that strad­dle its bor­der with Venezuela, in­clud­ing Cocuina-Man­akin, Drag­on and Man­a­tee. How­ev­er, he not­ed that with US Pres­i­dent-elect Don­ald Trump’s ad­min­is­tra­tion set to as­sume con­trol in Jan­u­ary 2025, there is, un­der­stand­ably, sig­nif­i­cant con­cern that these projects could be im­pact­ed by new US sanc­tions on Venezuela.

Joe­field added that no ma­jor in­crease in glob­al oil and gas prices is pre­dict­ed to oc­cur in 2025, notwith­stand­ing the re­cent de­ci­sion by OPEC+ to de­lay the re­ver­sal of a por­tion of its pro­duc­tion cuts to April 2025.

To sup­port prices, he not­ed the group cut a to­tal of 5.9 mil­lion bar­rels per day (b/d) from its out­put in a se­ries of agree­ments dat­ing back to 2022, stat­ing that it had pre­vi­ous­ly an­nounced plans to be­gin to grad­u­al­ly re­verse those cuts in Jan­u­ary 2025.

How­ev­er, with down­ward pres­sures on prices due to weak­ened glob­al de­mand and in­creased out­put from oth­er sup­pli­ers, OPEC+ de­cid­ed to grad­u­al­ly re­turn 2.2 mil­lion b/d of pro­duc­tion start­ing in April 2025 and to ex­tend the re­main­ing 3.7 mil­lion b/d cuts to the end of 2026.

Re­gard­ing the non-en­er­gy sec­tor, Joe­field said this area is ex­pect­ed to ex­pand fur­ther in 2025, with pos­i­tive per­for­mances ex­pect­ed in trade and re­pairs, trans­port and stor­age, man­u­fac­tur­ing and con­struc­tion. Nev­er­the­less, he warned that fre­quent and/or ex­tend­ed in­dus­tri­al ac­tion by trade unions rep­re­sent a ma­jor down­side risk for the sec­tor.

Per­tain­ing to the con­struc­tion in­dus­try, Joe­field said this is like­ly to re­ceive a boost as gov­ern­ment moves to com­plete key projects in the lead-up to the gen­er­al elec­tion next year.

How­ev­er, Joe­field al­so warned this is not guar­an­teed as pub­lic projects of­ten en­counter sig­nif­i­cant de­lays.

“Giv­en the vi­tal role pub­lic sec­tor con­struc­tion plays in lift­ing the en­tire sec­tor, any de­lays in the ex­e­cu­tion of gov­ern­ment’s cap­i­tal bud­get could con­strain the per­for­mance of the in­dus­try. For in­stance, gov­ern­ment al­lo­cat­ed ap­prox­i­mate­ly $6 bil­lion dol­lars for cap­i­tal ex­pen­di­ture in each of the last two fis­cal years but was on­ly able to ex­haust $4.2 bil­lion in 2023 and $4.5 bil­lion in 2024. The un­spent sums rep­re­sent lost po­ten­tial stim­u­lus for con­struc­tion and the wider econ­o­my,” he ex­plained.

Eco­nom­ic re­view

In the non-en­er­gy sec­tor, the over­all per­for­mance was pos­i­tive but not with­out chal­lenges.

The Min­istry of Fi­nance, in its 2024 Re­view of the Econ­o­my (ROE), fore­cast the con­struc­tion sec­tor to ex­pand by 2.3 per cent in 2024, af­ter con­tract­ing by 3.2 per cent in 2023.

How­ev­er, Joe­field said judg­ing by do­mes­tic ce­ment sales, which are usu­al­ly a good gauge of the health of the sec­tor, an ac­cel­er­a­tion of con­struc­tion ac­tiv­i­ty may be re­quired in the fourth quar­ter for that pro­jec­tion to be re­alised.

He al­so not­ed that dur­ing the first three quar­ters of 2024, do­mes­tic ce­ment sales in­creased by 1.5 per cent year-on-year sug­gest­ing pos­i­tive ac­tiv­i­ty, but al­so that the sec­tor did not gain sig­nif­i­cant mo­men­tum, fol­low­ing 2023’s weak per­for­mance.

The 2.9 per cent de­cline in ce­ment sales that oc­curred in the first quar­ter of 2024 off­set some of the im­pact of in­creased sales in the two suc­ceed­ing quar­ters.

Ac­cord­ing to Joe­field, giv­en the link be­tween con­struc­tion sec­tor ac­tiv­i­ty and ce­ment sales, it was no sur­prise that the fall in sales in the first quar­ter was ac­com­pa­nied by a rise in un­em­ploy­ment in con­struc­tion sec­tor to 8.7 per cent from 6.1 per cent in the pre­vi­ous quar­ter and 7.2 per­cent in the first quar­ter of 2023.

The lat­est avail­able da­ta in­di­cate that un­em­ploy­ment in the sec­tor av­er­aged 8.6 per cent in the first half of 2024 com­pared to 6.7 per cent in Jan­u­ary to June 2023, he added.

The ROE al­so sug­gest­ed that the rate of eco­nom­ic ex­pan­sion in the trade and re­pairs sec­tor and the trans­port and stor­age sec­tor will slow from 9.3 per cent to 3 per cent and from 6.4 per cent to 2.1 per cent, re­spec­tive­ly.

Joe­field said as it re­lat­ed to the trade and re­pairs sec­tor, new mo­tor ve­hi­cle sales are reg­u­lar­ly used as a gauge of ac­tiv­i­ty for at least a por­tion of the sec­tor.

In the first nine months of 2024, new mo­tor ve­hi­cle sales in­creased by 9.4 per cent com­pared to the same pe­ri­od a year ear­li­er, he not­ed, stat­ing that this rel­a­tive­ly fast rate of ex­pan­sion com­pared to the pro­ject­ed growth for the sec­tor may be a sign of a mixed per­for­mance among the in­dus­tries in the sec­tor and/or a faster-than-pro­ject­ed ex­pan­sion in the trade and re­pairs sec­tor.

Giv­en its close re­la­tion­ship to the trade and re­pair sec­tor, it is no sur­prise that the trans­port and stor­age sec­tor is al­so ex­pect­ed to record a no­tably slow­er rate of growth in 2024, he added.

Al­so, in the man­u­fac­tur­ing sec­tor, Joe­field said ac­tiv­i­ty is ex­pect­ed to ex­pand by 2.7 per cent af­ter a 6.1 per cent con­trac­tion in 2023.

He fur­ther not­ed that the food, bev­er­ages and to­bac­co sub-sec­tor is pre­dict­ed to post a 9.1 per cent re­cov­ery in 2024, af­ter shrink­ing by 2 per cent in the pre­vi­ous year.

This sub-sec­tor, Joe­field said, has been the fastest grow­ing of all man­u­fac­tur­ing in­dus­tries in re­cent times, ex­pand­ing by 31.7 per cent in 2022, part­ly re­flec­tive of its re­cov­ery from the dis­lo­ca­tions caused by the COVID-19 pan­dem­ic.

Un­for­tu­nate­ly, he not­ed the man­u­fac­tur­ing sec­tor ex­pe­ri­enced a rise in un­em­ploy­ment to 4.9 per cent (av­er­age) in the first six months of 2024 from 3.5 per cent in the same pe­ri­od a year ear­li­er, stat­ing that this may be a sign of a weak­er ex­pan­sion than pre­vi­ous­ly en­vis­aged, at least in the first six months of the year.

Joe­field fur­ther not­ed that with en­er­gy rev­enue flag­ging, gov­ern­ment con­tin­ued to face se­vere fis­cal chal­lenges in 2024.

Dur­ing the fis­cal year, to­tal rev­enue fell 7.9 per cent to $50.4 bil­lion, with en­er­gy rev­enue plung­ing by 48.4 per cent to $14.7 bil­lion.

On the oth­er hand, non-en­er­gy rev­enue ex­pand­ed by 26 per cent to $32.7 bil­lion, re­flec­tive of the sec­tor’s con­tin­ued growth in 2024.

He said the fall in to­tal rev­enue was ac­com­pa­nied by a mar­gin­al de­cline (0.6 per­cent) in to­tal ex­pen­di­ture to $57.5 bil­lion.

These de­vel­op­ments caused the fis­cal deficit to ex­pand to 3.5 per cent of GDP in the 2024 fis­cal year from 1.7 per cent of GDP in 2023.

The larg­er deficit ex­ert­ed ad­di­tion­al up­ward pres­sure on the coun­try’s pub­lic debt, which in­creased to 75.6 per cent of GDP from 72.1 per cent in the 2023 fis­cal year.

Against a back­drop of falling en­er­gy rev­enue, the mar­ket for for­eign ex­change re­mained very tight in 2024, giv­en con­tin­ued strong de­mand from busi­ness­es and con­sumers.