Renu­ka Singh

Econ­o­mists be­lieve Gov­ern­ment will have to man­age the econ­o­my very care­ful­ly go­ing for­ward in light of Fi­nance Min­is­ter Colm Im­bert’s an­nounce­ment of a mas­sive $15 bil­lion bud­get deficit due to the COVID-19 pan­dem­ic and crash in oil and gas prices on Mon­day.

Econ­o­mist Dr Roger Ho­sein ad­vised the Gov­ern­ment to find a way to cut its ex­pen­di­ture by $5 to $7 bil­lion.

“I am not sur­prised at all that the bud­get deficit is $15 bil­lion,” Ho­sein said in a tele­phone in­ter­view.

“I am not sure of the com­ing fis­cal year in terms of ex­pen­di­ture, but on the as­sump­tion that ex­pen­di­ture will re­main sim­i­lar as it did in the last few years, then we would con­tin­ue to run a fis­cal deficit. My ad­vice to the state is to find a way to cut ex­pen­di­ture by a fur­ther five to sev­en bil­lion and to pur­sue the mea­sures it has raised in the past to raise rev­enues.”

He added, “There was a pre­cip­i­tous fall in the price of oil and the price of gas, as well as the pro­duc­tion of oil seems to have been in the de­cline and the pro­duc­tion of gas as well.”

Ho­sein said while things may im­prove, we should not ex­pect too much too soon. Ho­sein sees an uptick in the econ­o­my by the end of the year and sta­bil­i­sa­tion with­in two years.

“Eco­nom­ic growth re­turn­ing, cer­tain­ly at a slow pace in the com­ing quar­ters but not back to what it was pre­vi­ous­ly. So that the trough of this cur­rent re­ces­sion, added on to the de­pres­sion of 2016, 17, 18 and 19 would see us prob­a­bly in pos­i­tive eco­nom­ic growth by the fourth quar­ter of 2020 and out of the de­pres­sion by 2022,” he said.

“Our chances of re­bound­ing ex­ist. Of course we would re­bound at some point in time, the dilem­ma is that it will take some time.”

How­ev­er, he said a mas­sive deficit means the coun­try will have to in­cur more loans.

“I think our debt can in­crease both in­ter­nal and ex­ter­nal and if this con­tin­ues it would lim­it the amount of fis­cal space that the state has re­main­ing and in so do­ing, via the ex­is­tence of in­ter­est pay­ments, eat in to the ca­pac­i­ty of the state to make in­vest­ments in cap­i­tal goods that are ur­gent­ly need­ed,” Ho­sein said.

He said the State has done a good job deal­ing with the COVID-19 cri­sis and he ex­pects draw­downs from the Her­itage and Sta­bil­i­sa­tion Fund (HSF), but said ex­pen­di­ture be­fore the cri­sis and plans for spend­ing af­ter it is a cause for con­cern.

“The state has been do­ing a good enough job with the health cri­sis. They had to draw down on the HSF so we can­not fault the Gov­ern­ment in that re­gard. Where there is room for im­prove­ment is the amount of ex­pen­di­ture that we un­der­took pri­or to COVID-19 and the amount of ex­pen­di­ture that we plan to un­der­take af­ter COVID-19,” he said.

Ho­sein said he was al­so not sure what to ex­pect in the next bud­get.

Fel­low econ­o­mist Sub­has Ramkhelawan, founder and man­ag­ing di­rec­tor of Bourse Se­cu­ri­ties, agreed with Ho­sein to an ex­tent.

“There was a $5 bil­lion deficit in the orig­i­nal bud­get and on top of that there is an­oth­er $10 bil­lion be­cause of cur­rent mar­ket is­sues and so on in terms of the Gov­ern­ment grant and sup­port,” he said.

“It is not an over­all in­crease in the deficit, it is the in­crease in­clu­sive of the $5 bil­lion bud­get deficit that ex­ist­ed.”

He agreed the coun­try was cur­rent­ly in a chal­leng­ing sit­u­a­tion.

“But this is not unique to us across the board,” he said.

“When you start to look at what it means in terms of the deficit rel­a­tive to the GDP (Gross Do­mes­tic Prod­uct) and so on, when you start to look at some of the in­di­ca­tors an­a­lysts would look at, it is a sig­nif­i­cant deficit.

“The pro­jec­tions for GDP, look­ing ahead for T&T, the GDP would be in neg­a­tive ter­ri­to­ry by about four and a half per cent.”

How­ev­er, Ramkhelawan said it’s not all bad news.

“We are for­tu­nate to have a rea­son­ably sized HSF, so draw­ing up­on it to the ex­tent that has been re­port­ed would es­sen­tial­ly make up for the $5 bil­lion deficit,” he said.

“The ques­tion re­al­ly is what is go­ing to hap­pen with things like cred­it rat­ing and cred­it qual­i­ty and what is go­ing to hap­pen to the re­serves.”

Ramkhelawan said when there is a draw­down from the HSF on a US dol­lar bal­ance and when that mon­ey is used to pay TT dol­lar oblig­a­tions, the Forex re­serve would go up by $1.5 bil­lion.

“That now has to be coun­tered by a sig­nif­i­cant re­duc­tion in for­eign ex­change earn­ings be­cause of the price of our ma­jor ex­port, oil and gas,” he said.

How­ev­er, he said pre­dic­tions and fore­casts about the coun­try’s eco­nom­ic fu­ture would be bet­ter when there was more in­for­ma­tion.