In­dera Sage­wan

Bud­get 2024 is up­on us and every­one wants to know what the econ­o­mists have to say. Is it go­ing to be a belt tight­en­ing or good­ies bud­get? Will we hear de­fin­i­tive de­ci­sions on in­creased wa­ter and elec­tric­i­ty rates? Are oth­er sub­si­dies to be re­duced or re­moved? Gate? CDAP? Se­nior Cit­i­zens Pen­sion?

The Min­is­ter of Fi­nance is ul­ti­mate­ly a politi­cian, and tra­di­tion tells us that the na­tion­al bud­get pre­ced­ing an elec­tion is al­ways a ma­jor cam­paign­ing tool and fund­ing source of the gov­ern­ing par­ty. I don’t ex­pect this to be any dif­fer­ent.

The ev­i­dence sug­gests that un­less the eco­nom­ic tra­jec­to­ry of the coun­try de­vi­ates from its cur­rent dis­mal trend, fears of hard­er times post the 2025 elec­tion will no doubt be­come re­al­i­ty. The Min­is­ter of Fi­nance has al­ready put us on no­tice, when, in the par­lia­ment, he stat­ed that it is prov­ing very dif­fi­cult to fi­nance the pur­chas­ing of free phar­ma­ceu­ti­cals for the chron­ic dis­ease as­sis­tance pro­gramme (CDAP). Al­so, the Min­is­ter of Pub­lic Util­i­ties is on record that cit­i­zens must help pay T&TEC’s $4 bil­lion nat­ur­al gas bill. The crazed scram­ble to col­lect prop­er­ty tax is an­oth­er sign.

That said, let’s take stock of where we are in 2024, and in­deed pon­der whether we are bet­ter off as a coun­try af­ter nine years of the cur­rent ad­min­is­tra­tion . Of course, we must be fair and ac­knowl­edge COVID-19 and its crush­ing so­cio-eco­nom­ic im­pact (2020-21), as well as the largesse that flowed in­to the trea­sury on ac­count of the Ukraine/Russ­ian War (2022).

In May 2024, the IMF pro­ject­ed a grad­ual and sus­tained eco­nom­ic re­cov­ery for T&T af­ter it record­ed in 2023, a 2.1 per cent re­al growth. This came af­ter 10 years of per­sis­tent neg­a­tive growth. The Fund pro­ject­ed growth of 2.4 per cent for 2024. Of course, pos­i­tive re­al growth is cause of cel­e­bra­tion and if it’s sus­tain­able go­ing for­ward, a Min­is­ter of Fi­nance’s Christ­mas wish come true. Un­for­tu­nate­ly, 2024, does not look set to val­i­date the IMF’s pro­jec­tion.

More­over, is growth with­out new em­ploy­ment gen­er­a­tion or forex gen­er­a­tion wor­thy of be­ing la­belled sus­tain­able? I posit that it does not.

The Fed­er­al Re­serve Bank of the Unit­ed States, re­cent­ly re­duced the bank’s lend­ing rate for the first time since COVID-19, be­cause, while in­fla­tion is now un­der con­trol, a con­tin­u­a­tion of the high bank rate threat­ened to dis­rupt the labour mar­ket by in­creas­ing un­em­ploy­ment. This is not good for the econ­o­my. So, at the risk of be­ing la­belled pro de­moc­rats, the Bank has done what is in the best in­ter­est of the coun­try’s sus­tained growth, em­ploy­ment be­ing a key el­e­ment.

Of­fi­cial­dom in Trinidad and To­ba­go boasts 5.4 per cent un­em­ploy­ment (close to full em­ploy­ment), If on­ly word on the ground sup­port­ed this. The num­ber of high school and uni­ver­si­ty grad­u­ates un­em­ployed or at best un­der­em­ployed speaks a dif­fer­ent sto­ry. Even if we take this 5.4 per cent un­em­ploy­ment at face val­ue, in­di­vid­u­als 30-49 years rep­re­sent­ed 59.8 per cent of the un­em­ployed and per­sons 15-29 28.1 per cent.

In ad­di­tion, and cause for grave con­cern is the labour force par­tic­i­pa­tion rate, which tells us the num­ber of em­ploy­able per­sons ac­tive­ly seek­ing em­ploy­ment. This stood at 54.6 per cent in the first quar­ter of 2024, falling from 55.5 per cent in 2023. In essence, per­sons are in­creas­ing­ly drop­ping out of the ac­tive labour force in T&T. This calls for ur­gent in­ter­ven­tion to find out why and re­verse.

Now, let us look at the pos­i­tive growth of 2023 and as­sess its sus­tain­abil­i­ty. At the be­gin­ning of fis­cal year 2023, the en­er­gy sec­tor (the main­stay of the econ­o­my) was pro­ject­ed grow by 2.95 per cent. In­stead, it con­tract­ed as fol­lows; ex­trac­tion of nat­ur­al gas de­clin­ing by 11.3 per cent, re­fin­ing, in­clud­ing liq­ue­fied nat­ur­al gas drop­ping by 11 per cent, crude oil ex­plo­ration and ex­trac­tion by 9 per cent and con­den­sate by 10.2 per cent.

In Ju­ly 2024, the Cen­tral Bank in its Mon­e­tary Pol­i­cy Re­port stat­ed that the “en­er­gy sec­tor is ex­pect­ed to con­tin­ue its down­ward tra­jec­to­ry this year.” Fun fact, T&T is cur­rent­ly pro­duc­ing half the vol­ume of nat­ur­al gas need­ed to main­tain cur­rent de­mand by its do­mes­tic LNG/petro­chem­i­cal plants).

There is there­fore no ba­sis for any new in­vest­ment in this sec­tor. Yet, we con­tin­ue with blind­ers along this sin­gu­lar path. You see, the fu­ture of this sec­tor rests sole­ly on the Drag­on deal with Venezuela, which is chal­lenged (me be­ing gen­tle).

And even if the Drag­on was to ma­te­ri­alise, we won’t see gas well be­yond 2028 and the vol­ume would on­ly be suf­fi­cient to main­tain cur­rent de­mand ca­pac­i­ty. Again, no sur­plus gas for sec­tor growth. That equals no new em­ploy­ment cre­ation.

Where then did this sus­tained re­cov­ery come from in 2023? Ac­cord­ing to the Min­istry of Fi­nance’s Re­view of the Econ­o­my for 2023, it came from the fol­low­ing non-en­er­gy in­dus­tries: Trade and re­pairs 10.9 per cent; man­u­fac­tur­ing 1.6 per cent; food, bev­er­age and to­bac­co 7.6 per cent; pe­tro­le­um and chem­i­cal prod­ucts con­tract­ed -1.8 per cent; and min­ing and quar­ry­ing 2.6 per cent. These were the big-tick­et in­dus­tries. Note that with­in man­u­fac­tur­ing, the petro­chem­i­cal in­dus­try which de­pends on nat­ur­al gas sup­plies, con­tract­ed, due in large part to gas cur­tail­ment. Are you see­ing sus­tain­abil­i­ty in these growth ar­eas? This econ­o­mist does not.

In 2023, Tourism (which should be a no brain­er), was flour­ish­ing in our neigh­bour­ing is­lands. Caribbean tourism was lead­ing the world in post COVID-19 re­cov­ery. In T&T, vis­i­tor ar­rival in 2023 was 21 per cent low­er than 2019 lev­els, and 2019 for T&T was no great year for tourism.

Like agri­cul­ture, tourism is an­oth­er bas­tard child. Ba­si­cal­ly, tourism in Trinidad equates to Car­ni­val and we’re do­ing a great job at de­stroy­ing what lit­tle ex­ists with the pro­lif­er­a­tion of crime. Maybe that’s the “sus­tained” growth the IMF is ref­er­enc­ing? We can now boast world leader at crime fa­cil­i­ta­tion, in­stead of the once leader in nat­ur­al gas and petro­chem­i­cal pro­duc­tion.

Let’s talk agri­cul­ture and food se­cu­ri­ty. Long a na­tion­al im­per­a­tive, re­peats it­self in every bud­get. Un­for­tu­nate­ly, ac­tion does not align with rhetoric.

Agri­cul­ture is lucky if in any fis­cal year it is al­lo­cat­ed $1 bil­lion. It gen­er­al­ly hov­er around $750 mil­lion and of that, 90 per cent is for re­cur­rent ex­pen­di­ture leav­ing a mere $75 mil­lion for growth project. Of course, there are the al­lo­ca­tions to the ADB and Namde­v­co etc, but the in­ef­fec­tive­ness of these state en­ter­pris­es to tru­ly sup­port this sec­tor needs a col­umn of their own.

Facts, in 2023 with the ex­cep­tion of rice and some veg­eta­bles, co­coa (sup­pos­ed­ly our sig­na­ture crop with tremen­dous po­ten­tial for forex earn­ing) con­tract­ed by 90 per cent from 85,000 kilo­grams to 85,000 kilo­grammes. Can you grasp this? Note­wor­thy is that in the 1930’s we pro­duced over 36,000 tonnes, yes, tons not kilo­grams of fine flavour co­coa pure­ly for ex­port.

Sim­i­lar­ly, the co­conut in­dus­try which by in­ter­na­tion­al re­ports has tremen­dous growth and rev­enue gen­er­at­ing po­ten­tial is plagued by dis­ease, even af­ter spe­cial projects aimed at its re­cov­er. And I have said noth­ing about the hoist of peren­ni­al chal­lenges such as prae­di­al lar­ce­ny, land tenure, cli­mate change.

Ac­cord­ing to the CSO, the re­tail sales in­dex ex­pand­ed by 4.8 per cent, tex­tiles and ap­par­el by 6.2 per cent; house­hold ap­pli­ances and fur­ni­ture by 4.7 per cent and dry goods by 1.5 per cent. No need to won­der where the scarce forex is go­ing. We con­tin­ue to be a dis­tri­b­u­tion econ­o­my. This is not sus­tain­able growth, es­pe­cial­ly giv­en the con­tract­ing forex earn­ing en­er­gy sec­tor. The av­er­age per­son can­not ac­cess forex, cred­it card lim­its are con­tin­u­al­ly be­ing ad­just­ed down­wards,

T&T’s debt to GDP ra­tio is 71 per cent, debt ser­vic­ing equates to around 30 per cent of our na­tion­al bud­get, Of­fi­cial re­serves are US$5.53 bil­lion rep­re­sent­ing 7.8 months im­port cov­er. The HSF has US$5.89 bil­lion (March 2024). This equates to 70 per cent of the av­er­age an­nu­al bud­get. This is not a healthy po­si­tion.

There is much work to be done to tru­ly put T&T on a sus­tain­able growth tra­jec­to­ry. It is ev­i­dent af­ter nine years that the cur­rent ad­min­is­tra­tion can­not get this job done. Yes, this bud­get will be about win­ning the next elec­tion, but what then?

The Econ­o­mist In­tel­li­gence Unit’s take on the T&T econ­o­my go­ing for­ward. “Giv­en the heavy re­liance of the econ­o­my on oil and gas, wan­ing do­mes­tic hy­dro­car­bons pro­duc­tion will cause GDP growth to de­cel­er­ate over the medi­um term, and soft­er en­er­gy prices will re­main a risk to the out­look through­out the 2024-28 fore­cast pe­ri­od. Un­less there is po­lit­i­cal will to di­ver­si­fy the eco­nom­ic base of the T&T’s econ­o­my, cra­paud smoke we pipe.