Econ­o­mists are warn­ing that the lat­est par­tial lock­down of T&T’s econ­o­my will have a dev­as­tat­ing im­pact on the coun­try in­clud­ing the per­ma­nent clo­sure of more busi­ness­es, fur­ther job loss­es, and a rise in pover­ty.

A year af­ter the Gov­ern­ment man­dat­ed the first COVID-19 re­lat­ed lock­down, there is a déjà vu feel­ing that there will be more hard­ship. Scores of busi­ness­es were forced to shut their doors per­ma­nent­ly dur­ing the first phase of the lock­down and hun­dreds of peo­ple were left job­less.

Last Thurs­day when Prime Min­is­ter Dr Kei­th Row­ley an­nounced a sec­ond lock­down, he in­di­cat­ed that the Gov­ern­ment does not have the mon­ey this time around to be as help­ful as they were last year.

The an­nounce­ment came on the heels of ris­ing COVID-19 cas­es and deaths in T&T. The PM said that malls and gyms will be closed, restau­rants, bars, cin­e­mas, casi­nos and church­es will al­so be closed among oth­er re­stric­tions.

Here the econ­o­mists ex­plain how a sec­ond lock­down will im­pact busi­ness­es and the econ­o­my in gen­er­al:

Economist Dr Indera Sagewan

GUARDIAN

SE­VERE IM­PACT

Econ­o­mist Dr In­dera Sage­wan is ex­pect­ing a "se­vere" im­pact on the econ­o­my as the coun­try has be­gun the lat­est par­tial lock­down.

She said while it was too ear­ly to put a dol­lar val­ue on the im­pact of the lock­down, it will dev­as­tate the econ­o­my as the coun­try has been closed to dif­fer­ent ex­tents since the pan­dem­ic start­ed in March 2020.

"I ex­pect more busi­ness­es to close per­ma­nent­ly, I ex­pect per­ma­nent un­em­ploy­ment to in­crease in the pri­vate sec­tor. The so­cial im­pact will be se­vere such as en­ter­tain­ment, tourism, the re­tail sec­tors as these sec­tors em­ploy un­skilled and se­mi-skilled in­di­vid­u­als. They al­so op­er­ate in the low­er-in­come brack­et of so­ci­ety. This is the sec­tor that has felt the brunt of COVID clo­sures," she added.

Speak­ing about the im­pact the clo­sure of SMEs would have on the Gov­ern­ment and its abil­i­ty to col­lect rev­enue, she said while some of its em­ploy­ees do not pay tax­es, they con­tribute to the Na­tion­al In­sur­ance pen­sion scheme and if they send home staff per­ma­nent­ly this would im­pact the fund.

On her Face­book page last week, Sage­wan had rec­om­mend­ed:

1. All fi­nan­cial in­sti­tu­tions sus­pend mort­gage/loan pay­ments for both busi­ness­es and in­di­vid­u­als un­til the econ­o­my is re­opened

2. The PM and all MPs/Min­is­ters will take a 50 per cent pay cut un­til the econ­o­my is in pos­i­tive growth once again

3. All pub­lic ser­vants and state en­ter­prise's em­ploy­ee from the top be paid 50 per cent of their salaries free­ing up re­sources to pro­vide some re­lief to the pri­vate sec­tor un­em­ployed be­cause they have chil­dren to feed too, so the bur­den must be shared if the Gov­ern­ment doesn’t have the mon­ey to sup­port the un­em­ployed

4. All su­per­mar­kets and phar­ma­cies price mer­chan­dise at cost price un­til the econ­o­my is re­opened. It should not be nec­es­sary for every item but it could be for some of the most pop­u­lar items.

Dur­ing the in­ter­view with the Sun­day Guardian, she jus­ti­fied these rec­om­men­da­tions by say­ing that those who hold pow­er must share the bur­den with so­ci­ety and not on­ly al­low it to fall on low­er-in­come peo­ple.

"The Gov­ern­ment should lead by ex­am­ple and share the pain the av­er­age cit­i­zen is feel­ing."

She crit­i­cised the Gov­ern­ment for hav­ing a "knee-jerk re­ac­tion" in terms of its eco­nom­ic man­age­ment in­stead of hav­ing a re­al plan.

Sage­wan said COVID-19 was an ab­nor­mal pe­ri­od in the world’s his­to­ry and calls for un­ortho­dox meth­ods. She be­lieves if the sit­u­a­tion war­rants it, the Gov­ern­ment should dip in­to the Her­itage and Sta­bi­liza­tion Fund (HSF) if there is an emer­gency. How­ev­er, she ar­gues if and when it is done, the Gov­ern­ment should use the mon­ey to gen­er­ate new in­vest­ments rather than mere cash trans­fers.

She en­cour­aged the Gov­ern­ment to breathe life in­to oth­er parts of the econ­o­my such as agri­cul­ture and food pro­duc­tion, the mar­itime sec­tor such as al­low­ing yachts to dock here and gen­er­at­ing a tourism in­dus­try.

The Gov­ern­ment was tak­en to task for its in­abil­i­ty to pro­tect our porous bor­ders. "Al­though our bor­ders are for­mal­ly closed the truth is that that we are opened and peo­ple are en­ter­ing through our porous bor­ders. So whose re­spon­si­bil­i­ty is it?"

She al­so said that the au­thor­i­ties have failed to po­lice peo­ple’s be­hav­iour in pub­lic, es­pe­cial­ly those who breach the COVID-19 re­stric­tions.

Economist Dr Vanus James

GDP RE­DUC­TION

Econ­o­mist Dr Vanus James ex­pects busi­ness­es to lay off work­ers and cut salaries over the next few weeks.

"Many busi­ness­es are say­ing they do not have the fi­nan­cial ca­pac­i­ty to keep staff. This will re­sult in a drop in sales. This is not on­ly for peo­ple in re­tail but in oth­er in­dus­tries. Peo­ple are say­ing that the lock­down will re­duce their cash flow and they do not know how they will keep on work­ers. Many told me to­day (Fri­day) they will talk to their work­ers and tell them for the next month they can stay on the job but they can­not get paid," he said.

He agrees with the prin­ci­ple of lock­ing down as the COVID-19 case grows but added that if there are not ac­com­pa­ny­ing eco­nom­ic mea­sures then the econ­o­my will be dam­aged bad­ly.

Ac­cord­ing to James, the Gov­ern­ment ought to be pro­vid­ing cash flow re­leas­es for low­er-in­come peo­ple to sur­vive the lat­est lock­down.

"This should in­clude soft loans to busi­ness­es, part­ner­ing with busi­ness own­ers to keep work­ers. The British Gov­ern­ment promised to cov­er 60 per cent of the costs of busi­ness­es if own­ers keep staff. The T&T Gov­ern­ment has to con­sid­er con­di­tion­al cash trans­fers rather than let­ting every­one be­come un­em­ployed and then they end up on the Gov­ern­ment wel­fare roll."

Pre­dict­ing that if the cur­rent lock­down goes on for more than just a few weeks and in­to months, up to ten per cent of the Gross Do­mes­tic Prod­uct (GDP) could be lost, James said. "We won’t even get close to that IMF pro­jec­tion of 2.1 per cent. Maybe there will be one per cent or no growth. If we have to do three to four months of lock­down there will be a ma­jor de­cline in out­put.

"Look at work­ers stay­ing home, that’s a ma­jor pro­duc­tiv­i­ty hit. That means a re­duc­tion in out­put. You have to watch un­til you get to the peak of the COVID-19 spread that may mean they may keep the lock­down for an­oth­er four months. That will re­duce ten per cent of your GDP right away.

"Re­mem­ber we have had a year of neg­a­tive growth and this just com­pounds it."

Speak­ing about SMEs, James said that the clo­sure of these tax-pay­ing busi­ness­es dur­ing the month of May will have a se­ri­ous im­pact.

"It is a catch 22 for them. If these busi­ness­es pay tax­es, they bust. If they do not pay tax­es then the Gov­ern­ment will have to bor­row. The Gov­ern­ment should pro­vide a de­fer­ral of that tax oblig­a­tions. The Gov­ern­ment should bor­row through the Cen­tral Bank, bor­row through bonds that they is­sue or bor­row in­ter­na­tion­al­ly, and hope that they get vac­cines in six months. If it does not hap­pen, every­one will be go­ing bank­rupt in­clud­ing the Gov­ern­ment.”

He al­so be­lieves that the Gov­ern­ment will most like­ly re­turn to the HSF.

In the short-and-medi­um terms, once the coun­try gets out of the COVID-19 cri­sis, he said the coun­try must look for in­vest­ments to re­ac­ti­vate the econ­o­my.

He used To­ba­go’s tourism as an ex­am­ple of the po­ten­tial of the coun­try post COVID-19.

Prof Patrick Watson

HURT­ING THE POOR

Mean­while, Prof Patrick Wat­son said that the Gov­ern­ment had no oth­er choice to im­ple­ment a par­tial lock­down of the econ­o­my as cas­es would con­tin­ue to rise, which would lead to deaths and a fur­ther de­te­ri­o­ra­tion of the econ­o­my.

How­ev­er, he said the Gov­ern­ment seems to be in a sit­u­a­tion with no re­al favourable op­tions as the lock­down will have dire con­se­quences as low­er-in­come peo­ple will lose jobs and ex­pe­ri­ence salary cuts.

He al­so said the loss of jobs and the clo­sure of some busi­ness­es will be per­ma­nent.

"These few weeks will be enough to take out a few en­ter­pris­es. If you go to the malls you will see busi­ness­es closed. The work­ers at the bars and KFC will be af­fect­ed. I am hop­ing that this does not re­sult in neg­a­tive so­cial out­comes. There could be an in­crease in pet­ty theft, those who have lost their jobs may feel that they are forced to do things that are not so­cial­ly ac­cept­able."

Wat­son not­ed that ad­vanced economies like the Unit­ed States will see pos­i­tive eco­nom­ic growth this year as there was a lot of pent up ac­tiv­i­ty that did not take place dur­ing the pan­dem­ic.

How­ev­er, he said it was a dif­fer­ent sit­u­a­tion in T&T.

"What we learned in the uni­ver­si­ty is that when mon­ey is spent it ex­pands the econ­o­my. But it is dif­fer­ent for T&T as when we spend mon­ey it is on lim­it­ed goods and ser­vices. That re­quires forex. So the mon­ey that we are not spend­ing now may be a good thing for for­eign ex­change. So when the pan­dem­ic ends and there's an in­crease in spend­ing there could be a de­ple­tion in for­eign re­serves.”

He said the Gov­ern­ment must work quick­ly to find new ways of earn­ing for­eign ex­change away from the en­er­gy sec­tor.

Wat­son felt it was "al­most in­evitable" that the Gov­ern­ment will be dip­ping in­to the HSF soon.

"The leg­is­la­tion re­cent­ly passed made it rel­a­tive­ly eas­i­er to go in­to the Fund. I un­der­stand a re­luc­tance on their path as they un­der­stand that the gen­er­al pub­lic is re­luc­tant. But the re­luc­tance of the pub­lic will be a func­tion of how des­per­ate the sit­u­a­tion be­comes."

Dr Anthony Gonsalves

DI­VER­SI­FI­CA­TION OF THE ECON­O­MY

Econ­o­mist Dr An­tho­ny Gon­salves told the Sun­day Guardian that there will be se­ri­ous eco­nom­ic and so­cial ef­fects from the par­tial clo­sure of the econ­o­my in May.

This in­cludes busi­ness­es clos­ing per­ma­nent­ly and loss of jobs.

"There is no ques­tion that the eco­nom­ic loss will hap­pen. The Gov­ern­ment is not in a po­si­tion to sus­tain peo­ple as be­fore. The choic­es are very dif­fi­cult for the Gov­ern­ment."

He said the coun­try will have to "hold strain" for an­oth­er five or six months un­til the Gov­ern­ment gets more vac­cines be­fore the econ­o­my could be ful­ly re­opened.

He said the Gov­ern­ment’s eco­nom­ic strat­e­gy has not changed sig­nif­i­cant­ly since the pan­dem­ic hit.

"The idea of di­ver­si­fy­ing the econ­o­my is there. They are much more aware of the need to do it. They al­so know we on­ly have a lim­it­ed amount of time with oil."

Gon­salves added that the good news with the de­vel­oped world slow­ly re-open­ing would mean good news for the tourism-based coun­tries of the Caribbean and even T&T which would be able to trade more open­ly with these vi­brant economies.

All of this would help T&T’s post-pan­dem­ic re­cov­ery, he said.

HER­ITAGE AND STA­BIL­I­SA­TION FUND

In 2020, the coun­try with­drew ap­prox­i­mate­ly US$1.2 bil­lion from its sov­er­eign wealth fund, the HSF. That sum cov­ers the pe­ri­od Jan­u­ary 1, 2020, to De­cem­ber 31, 2020, and the mon­ey was drawn down in the fis­cal years 2020 and 2021.

In fis­cal 2020, US$900 mil­lion was with­drawn from the Fund and so far for fis­cal 2021, US$300 mil­lion has been with­drawn for bud­get sup­port.

The HSF has been a cush­ion for T&T’s econ­o­my as the Gov­ern­ment has used it when it has strug­gled with rev­enue to meet salaries and oth­er bud­get­ed ex­pen­di­ture. As of Sep­tem­ber 2020, the Fund stood at US$5.73 bil­lion.

To mit­i­gate the ef­fects of COVID-19 on the econ­o­my, the Gov­ern­ment ini­ti­at­ed a com­pre­hen­sive stim­u­lus pack­age that need­ed fund­ing—some of which came from the HSF.

On March 26, 2020, an amend­ment to the HSF Act was passed in Par­lia­ment to al­low for with­drawals of up to US$1.5 bil­lion dur­ing the fi­nan­cial year, in the event of a health cri­sis, a nat­ur­al dis­as­ter or a pre­cip­i­tous drop in bud­get­ed rev­enue.

Govt spent $6B in first phase of lock­down

The Gov­ern­ment said it spent $6 bil­lion in the first phase of the COVID lock­down in 2020 to help cit­i­zens. Mon­ey was used for pro­grammes such as salary re­lief grants, food cards, and fund­ing for cred­it unions and banks to grant loans to keep busi­ness­es afloat.

On Thurs­day, the PM said the mon­ey was "just not there."

"What I said is that we will not be in a po­si­tion to be as help­ful as we were in the be­gin­ning be­cause the mon­ey is just not there. When we in­ter­vened in March, April last year we told you where the mon­ey was from. It was bor­rowed mon­ey. We bor­rowed mon­ey to fight the virus at that stage. We came through the year 2020 do­ing rea­son­ably well. In 2021 we are now called up­on again. The Min­is­ter of Fi­nance will have to look to see that we can pre­serve the so­cial sup­port sys­tem that we have in place. This coun­try has a large so­cial sup­port sys­tem in place. We do not have the re­sources to be as help­ful as we were last year. How far we will go? I can­not say as yet."

Busi­ness­es–both small and large–are brac­ing for hard times. They said that the eco­nom­ic de­pres­sion was al­ready push­ing their busi­ness­es over the cliff and with this lat­est lock­down, they are on the verge of clos­ing their doors per­ma­nent­ly.

The Sun­day Guardian emailed and tried call­ing Min­is­ter of Fi­nance Colm Im­bert and Min­is­ter in the Min­istry of Fi­nance Bri­an Man­ning ask­ing for more de­tails on what the im­pact would be on the pop­u­la­tion and what mea­sures the Gov­ern­ment in­tends to take to as­sist. But there was no re­sponse up to late yes­ter­day.