De­spite be­ing bol­stered by the en­er­gy com­mod­i­ty prices in 2022, T&T’s econ­o­my, like much of the Caribbean, may face an un­cer­tain fu­ture due to chal­lenges in the glob­al econ­o­my.

This was one of the notes on T&T in Caribbean Eco­nom­ics Quar­ter­ly: Vol­ume 12, Is­sue 2: Glob­al and Re­gion­al Economies at a Cross­roads, pro­duced by the In­ter-Amer­i­can De­vel­op­ment Bank (IDB).

The re­port stat­ed: “Un­cer­tain­ty of the glob­al econ­o­my presents down­side risks to the econ­o­my. Nat­ur­al gas prices plum­met­ed to US$2.10 per mmb­tu in May 2023 and crude oil prices are now es­ti­mat­ed to av­er­age US$73.13 per bar­rel in 2023, then fall fur­ther in 2024. In the short term, GDP growth and debt tar­gets are de­pen­dent on in­creas­ing en­er­gy sec­tor pro­duc­tion.”

The sec­tion on Trinidad and To­ba­go which was put to­geth­er by Nir­vana Sat­nar­ine-Singh and Vic­tor Gau­to, ac­knowl­edged that there have been ef­forts to bol­ster en­er­gy pro­duc­tion.

“The au­thor­i­ties have there­fore in­tro­duced sev­er­al in­cen­tives to pro­mote ex­plo­ration. Thrusts to­wards dig­i­tal­i­sa­tion and re­new­able en­er­gy projects can boost ac­tiv­i­ty in the non-en­er­gy sec­tor and pro­mote di­ver­si­fi­ca­tion,” the re­port stat­ed.

As the re­port not­ed: “Key risks and op­por­tu­ni­ties al­so vary across coun­tries, and these are analysed in the coun­try sec­tions of the re­port.”

The re­port said: “High en­er­gy prices sup­port­ed eco­nom­ic re­cov­ery in 2022. T&T ben­e­fit­ed from high­er-than-ex­pect­ed com­mod­i­ty prices in 2022, which sup­port­ed eco­nom­ic growth, con­tributed to in­creas­ing ex­ports, boost­ed the fis­cal out­turn, and re­duced the debt-to-GDP ra­tio. With en­er­gy prices falling be­low bud­get­ed as­sump­tions for 2023, medi­um-term growth pro­jec­tions have mod­er­at­ed. Pro­duc­tion of the coun­try’s main ex­port­ed en­er­gy com­modi­ties have fall­en be­low ‘boom’ lev­el, con­strain­ing out­put of the petro­chem­i­cal in­dus­try.”

The IDB re­port how­ev­er em­pha­sised that the non-en­er­gy sec­tor pushed the coun­try’s over­all re­cov­ery.

“The ser­vices sec­tor grew at dy­nam­ic rates through most of 2022. The un­em­ploy­ment rate fell al­most on par with the pre-pan­dem­ic rate and com­mer­cial banks’ lend­ing to the pri­vate sec­tor has re­cov­ered strong­ly.

“The eco­nom­ic re­cov­ery for 2022 is es­ti­mat­ed to have mod­er­at­ed as en­er­gy prices slowed glob­al­ly. Ac­cord­ing to the IMF, GDP grew by 2.5 per cent in 2022. This is be­low their pre­vi­ous­ly fore­cast­ed 4 per cent but above the gov­ern­ment’s GDP growth pro­jec­tion of 2 per cent,” the re­port stat­ed.

The re­port con­tin­ued: “The re­cov­ery in 2022 was main­ly dri­ven by the non-en­er­gy sec­tor. The IMF es­ti­mat­ed the non-en­er­gy sec­tor to have grown by 4.3 per cent while the en­er­gy sec­tor con­tract­ed by 1.8 per cent.

“In fact, of­fi­cial sta­tis­tics state that the non-en­er­gy sec­tor, which ac­count­ed for 70 per cent of re­al GDP in the first three quar­ters of 2022, out­per­formed the en­er­gy sec­tor in the first half of 2022. While the non-en­er­gy sec­tor grew by an av­er­age of 4.9 per cent in the first three quar­ters of 2022, the en­er­gy sec­tor con­tract­ed slight­ly by 0.7 per cent. How­ev­er, in 2022 Q3 the en­er­gy sec­tor had a strong re­cov­ery, ex­pand­ing by 5.4 per cent com­pared to 1.2 per cent in the non-en­er­gy sec­tor. “

It not­ed that as­pects of that turn­around may be­gin to fall away: “The vol­ume of ex­ports of goods and ser­vices as a com­po­nent of GDP growth, grew by an av­er­age of 33 per cent in 2021-2022 af­ter falling by 26 per cent in 2020, the year of the pan­dem­ic. Part of the gain is pro­ject­ed to re­cede in 2023 with a con­trac­tion in the vol­ume of ex­ports of goods and ser­vices by 20 per cent, be­fore sta­bil­is­ing at an av­er­age growth rate of 1 per cent in 2024 - 2028, po­ten­tial­ly re­lat­ed to sup­ply con­straints in the oil and gas in­dus­try.

The re­port con­tin­ued: “Gov­ern­ment rev­enues are in­trin­si­cal­ly linked to the lev­el eco­nom­ic ac­tiv­i­ty and ex­ports, with rev­enues grow­ing by 47 per cent in 2022 be­fore sta­bil­is­ing at a pro­ject­ed av­er­age of 3 per cent in 2024 - 2028.”

How­ev­er there were oth­er con­cerns that the re­port high­light­ed as it point­ed out T&T’s work­force still had no­tice­able gaps and the cost of liv­ing had in­creased due to sharp price in­creas­es in food.

The re­port states: “Re­cov­ery in labour force par­tic­i­pa­tion is al­so lag­ging, with around 55 per cent of the work­ing pop­u­la­tion join­ing the work­force in 2022 and ear­ly 2023, com­pared to 57 - 59 per cent be­tween 2018 and 2019.

“The gap be­tween fe­male and male un­em­ploy­ment re­mained al­most un­changed when com­par­ing pre and post-pan­dem­ic pe­ri­ods, with the fe­male un­em­ploy­ment rate sur­pass­ing the male rate by 1.6 per­cent­age points at the end of March 2023. The un­em­ploy­ment rate of fe­males was record­ed at 5.8 per cent while the un­em­ploy­ment rate of males was 4.2 per cent in March 2023. “

It con­tin­ued: “Do­mes­tic price lev­els were main­ly in­flu­enced by ex­ter­nal fac­tors which spilled over to af­fect food and trans­porta­tion costs. Af­ter hav­ing rel­a­tive­ly mod­er­ate in­fla­tion rates in 2021, in 2022 in­fla­tion in­creased, fol­low­ing glob­al trends af­fect­ed by en­er­gy price spikes. The an­nu­al in­fla­tion rate climbed through 2022 reach­ing 8.7 per cent in De­cem­ber.

How­ev­er, the re­port did point out that the price in­creas­es “were mod­er­ate com­pared to some oth­er coun­tries in the Caribbean which ex­pe­ri­enced dou­ble-dig­it in­fla­tion for some parts of 2022.”

Still, the re­port not­ed that the gov­ern­ment’s de­ci­sion to re­duce the fu­el sub­sidy in Sep­tem­ber 2022 to strength­en its fis­cal po­si­tion could have con­tributed to high­er prices lev­els.

Op­por­tu­ni­ties

The re­port in­di­cat­ed that the cur­rent glob­al con­text of­fers op­por­tu­ni­ties for Caribbean economies to raise long-term growth.

It said ear-shoring or “friend-shoring” could spur stronger for­eign di­rect in­vest­ment and greater eco­nom­ic di­ver­si­fi­ca­tion, in­clud­ing the glob­al ser­vices sec­tor (where Ja­maica, for ex­am­ple, al­ready has a strong base).

“The com­mod­i­ty price shock served as a ‘wake-up call’ on food and en­er­gy se­cu­ri­ty, in­spir­ing re­gion­al ef­forts to low­er ex­tra-re­gion­al food im­port bills, and to push for the in­vest­ment in re­new­able en­er­gy,” said the re­port, adding, “New agri­cul­tur­al tech­nolo­gies could in­crease scope for agri­cul­ture in coun­tries cur­rent­ly with­out a strong base, and re­gion­al in­te­gra­tion com­bined with in­vest­ment and new tech­nolo­gies could ex­pand and di­ver­si­fy agri­cul­tur­al pro­duc­tion in those coun­tries with a stronger tra­di­tion in the sec­tor.

The IDB said en­er­gy se­cu­ri­ty, cou­pled with the grow­ing recog­ni­tion of cli­mate change and mul­ti­lat­er­al fund­ing, has spurred in­vest­ments in al­ter­na­tive en­er­gy sources such as so­lar and wind. De­clin­ing cost for re­new­able en­er­gy so­lu­tions could fur­ther low­er de­pen­dence on cost­ly and volatile hy­dro­car­bon sup­plies.

The re­port not­ed that at their Ju­ly Heads of Gov­ern­ment Sum­mit, Cari­com lead­ers called for re­vis­it­ing trade agree­ments with ex­ter­nal part­ners, in­creas­ing labour mo­bil­i­ty and mov­ing to­wards re­gion­al cap­i­tal mar­ket in­te­gra­tion.

“The dig­i­tal no­mad phe­nom­e­non, cre­at­ed by the pan­dem­ic, can open the op­por­tu­ni­ty for new forms of tourism and oth­er ser­vices. In­vest­ment in the blue and green nat­ur­al as­sets of the Caribbean is an­oth­er promis­ing op­por­tu­ni­ty,” said the re­port.