Finance Minister Colm Imbert

The T&T economy is facing significant downside risk fuelled by a likely slowdown in global growth, continued low energy production, an inability to fully reopen the economy and the continuing pandemic.

This year the Minister of Finance has to show real skill and the government must get its act together. It is not easy and if we are to judge by the last seven years it is unlikely Minister Colm Imbert and his team are up to it.

It was on Tuesday the World Bank warned that following a strong rebound in 2021, the global economy is entering a pronounced slowdown amid fresh threats from COVID-19 variants and a rise in inflation, debt, and income inequality that could endanger the recovery in emerging and developing economies.

It predicted that global growth could decelerate markedly from 5.5 per cent in 2021 to 4.1 per cent in 2022 and 3.2 per cent in 2023 as pent-up demand dissipates and as fiscal and monetary support is unwound across the world.

According to the World Bank, the rapid spread of the Omicron variant indicates that the pandemic will likely continue to disrupt economic activity in the near term. In addition, a notable deceleration in major economies—including the United States and China—will weigh on external demand in emerging and developing economies.

At a time when governments in many developing economies lack the policy space to support activity if needed, new COVID-19 outbreaks, persistent supply-chain bottlenecks and inflationary pressures, and elevated financial vulnerabilities in large swaths of the world could increase the risk of a hard landing.

“The world economy is simultaneously facing COVID-19, inflation, and policy uncertainty, with government spending and monetary policies in uncharted territory. Rising inequality and security challenges are particularly harmful for developing countries,” said World Bank Group President David Malpass.

“Putting more countries on a favourable growth path requires concerted international action and a comprehensive set of national policy responses.”

This is worrying news for the T&T economy which has suffered from seven years of consecutive negative growth and has seen real GDP fall by a quarter.

There is an expectation that T&T’s economy could grow by as much as 5 per cent this year on the strength of rising energy prices and production and as the government eases lockdown measures.

So far the Government has kept to its promise not to close the economy, even as we face record deaths and infections. It is a decision I support because I do not feel the country should be held to ransom by those who choose not to be vaccinated.

It is why I also support the Government’s attempt to impose safe zones in the public sector to both encourage people to become vaccinated and also to reduce the risks of constant waves of infections in the public sector.

To be clear, I am not saying that there are not people who for medical and even religious reasons may not be in a position to be vaccinated and therefore get a waiver, but for the vast majority of those who remain unvaccinated, it is a choice they have made—one that they have the right to do and one which their employers in both the public and private sectors must also have a right to say in those circumstances you cannot function on the job. If there is a possibility for them to work from home, that can also be explored but if you must be in the office, holding others to ransom is unacceptable.

T&T requires the world’s economy to continue to grow. That will help commodity prices and will help us as this country has to earn foreign exchange if it is going to have any chance of survival.

As of yesterday, crude prices continued to average over US$80 a barrel and natural gas prices at the US Henry Hub was well over US$4 per MMbtu. These are windfall prices.

Ammonia prices are over US$,1000 a metric tonne and methanol and urea prices remain strong. If this continues for the rest of the fiscal year not only would the Government be collecting higher rents from the energy sector but it will also get higher dividends from both Heritage and the National Gas Company.

In fact, the recent crowing on the part of the Minister of Energy that the NGC had done well and that it had made over $1 billion was another attempt to pull the proverbial wool over the country’s eyes and to play down its wastage of over a quarter billion dollars on a hare-brained scheme to bet against the very petrochemical sector that is now allowing the government, country and the very NGC to benefit from higher prices.

What the Government needs to do is to be laser focused on increasing the natural gas production so that all sectors, including LNG, could get their Daily Contracted Quantities (DCQ) and benefit from what is a windfall and what by its very nature cannot be expected to last for long.

As a small open economy, T&T relies on foreign exchange to buy from our food to cars, parts and machinery.

In fact one of the major structural challenges of this economy is that too few businesses are earners of hard currency and make a lot of TT dollars by being essentially traders.

Of course all businesses cannot be exporters but the over-reliance on the energy sector and to some extent, the manufacturing sector for our sustenance is never a formula that can lead to success.

It is why the reports that KLM has extended its flights between Amsterdam and Port-of-Spain is encouraging as it is to see British Airways return to Tobago.

There is also word that Virgin Atlantic and other airlines are planning to return to either Tobago or Port-of-Spain.

These all point to an important part of our economy that is often overlooked, but which the pandemic has shown us to be very important.

That is the tourism sector. For ease of reference I am including in this sector everything from hotels, to restaurants, to entertainment and recreation and even bars.

This “tourism sector” employs thousands and has been decimated by the impact of the pandemic. Thousands have lost their jobs, many have left the industry altogether, businesses closed and people furloughed.

This is one sector that not only has the capability of employing thousands but of earning foreign exchange.

As a country we have to be innovative and find ways to grow this sector and this is why it is disappointing that to date the Government can provide no guidance on safe zone Carnival events so that promoters and others who earn a living from the Carnival can at least get something from it.

The non-energy sector part of the economy was hit hard last year from Carnival’s cancellation and looks likely to suffer a similar faith this year.

We have to be smart in the way we do things and we must also be able to weigh risk and make decisions based on these calculations.

According to the World Bank rising inflation—which hits low-income workers particularly hard—is constraining monetary policy.

Globally and in advanced economies, inflation is running at the highest rates since 2008. In emerging market and developing economies, it has reached its highest rate since 2011.

Many emerging and developing economies are withdrawing policy support to contain inflationary pressures—well before the recovery is complete.

Already T&T is facing the inflationary pressure and this threatens not just industrial peace but the ability of the most vulnerable to survive in the economy.

This year the Finance Minister and government must perform and make smart moves because if they don’t it could be another year of a failing economy.