Diversification more urgent than ever- Part 2

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The TTWhistleblower today continues this series looking at the urgency of economic diversification amidst the onset of political lethargy that seems likely from buoyant energy prices.

The Keith Rowley Administration has since the 2010 to 2015 PNM Opposition made heavy weather on the need for diversification, the urgency of new support platforms for revenue and industry and a plan that many expected would be implemented after the 2015 general election.

To date, the only change in the economy has been historic decline, a range of burdensome taxes, food and fuel price increases, and increasing job losses.

Weak at mid-term

 By the time the Rowley Administration arrived at mid-term, little in the way of capital projects, new industries, or stronger economic sectors seemed to be visible.

Job losses have mounted, economic decline have become a regular feature of discussion on the state of the nation, crime has gone way past crisis point and taxes and the cost of living have become more burdensome.

Assessing the Rowley Administration’s performance, the Trinidad Guardian was blunt as its headline 11 March 2018 admonished: “Poor Marks for the PNM.

The newspaper listed the key areas of failure – Economy, Crime, Health, Tourism, Foreign Relations, Government’s performance and the Prime Minister’s performance.

It went even further, with another headline on an inner page stating: “PM Rowley’s performance as leader lacking.

Economist, Dr Marlene Attz said: “There is a disconnect between the Prime Minister and what is actually happening in his Cabinet and with his Government Ministers.”

Economist Indera Sagewan-Alli described Rowley as an “absentee Prime Minister”.

Struggling economy

Despite a number of assurances that an economic diversification plan would be implemented, in Part one of this series, theTTWhistleblower was able to identify that no such plan is in place.

With the Rowley Administration now being two and a half years in, Dr Attz was at pains to say that a level of economic stillness has set in, with decline in earnings and no major new sources of revenue.

Dr Attz said there was disappointment in the economy, in the population and things are just not happening.

Pointing directly to economic diversification, Sagewan-Alli was clear: “This remains all talk and no action.”

What is worrying about the comments of these experts on the current level of economic diversification and the state of the economy is the fact that a major economic authority, the Central Bank, shares the expert views.

Central Bank Bulletin

In the March 2018 Central Bank Economic Bulletin, a number of areas were found to be even weaker than in its previous assessments in September last year.

Energy and Energy Industries looked brighter, largely on the basis of increasing global energy prices. According to the Bulletin: “The Energy Commodity Prices Index (ECPI) (January 2007=100) used by the Central Bank to gauge the overall movements in the prices of Trinidad and Tobago’s main energy products, rose by 23.0 percent over the course of 2017.”

A significant increase in the price of methanol (46.7 percent) during the period, coupled with notable increases in the prices of some petroleum products, was largely responsible for the gains in the ECPI.”

In the gas sector, the Central Bank found: “Natural gas prices were supported by strong demand from China as part of the country’s drive to replace coal with natural gas. Prices at the Henry Hub averaged US$2.96 per mmbtu during the year, an 18.7 percent improvement from the average price level in 2016.

And in the context of the entire energy sector and output, the Central Bank stated: “Provisional data from the Central Bank’s Quarterly Index of Real Economic Activity (QIEA) for the third quarter of 2017 (year-on-year) suggest that energy output expanded by 13.5 percent while the non-energy sector was estimated to have declined by 1.9 percent.”

Of note was the Central Bank’s findings in the petroleum sector where as global energy prices have increased, so too has Trinidad and Tobago’s production: “Over the third quarter of 2017, crude oil production increased by 3.8 percent year-on-year. Output averaged 70,447.3 barrels of oil per day (bopd), up from 67,884.0 bopd in the corresponding period of 2016.”

Also of note were findings in natural gas production: “The natural gas industry was boosted in the third quarter of 2017 by the startup of the Juniper platform. Natural gas production rose 13.7 percent (year-on-year) during the third quarter of 2017 with output averaging 3,452.0 million standard cubic feet per day (mmscf/d).”

The non-energy sector

The questions that surface from the Central Bank’s findings could amount to whether the Rowley Administration has, or had, any intention of pursuing an economic diversification programme, or if it just buckled down and rode the aggressive wave to the present, where energy prices and production are increasing.

Because when we examine the Central Bank’s findings in the non-energy sector, grim can easily become gloom and doom.

The non-energy sector remained sluggish in the third quarter of 2017.

The Distribution Sector was estimated to have contracted by 3.6 percent (year-on-year), evidenced by a fall of 2.5 percent in the Index of Retail Sales.

Supermarket and grocery sales increased.

The sales of construction and hardware materials, as well as household appliances and furniture, continued to decline.

The Finance, Insurance and Real Estate sub-sector contracted (1.0 percent).

Slower activity in the commercial bank and non-bank financial institutions sub-sectors weighed down improvements in other areas such as the trust and mortgage companies.

Construction remained weak but there was improvement in sales of mined aggregates (6.6 percent), the first increase since the first quarter of 2015.

Local sales of cement continued to fall (4 percent) in the third quarter.

Manufacturing contracted by 0.5 percent during the quarter.

The Transport and Electricity and Water sectors also recorded declines, of 0.8 percent and 0.1 percent, respectively.

Unemployment among youths was found to be particularly high compared with other age categories. Unemployment among the 15-19, 20-24, and 25-29 age groupings were 19.8 percent, 10.3 percent, and 7.3 percent, respectively.

More discouraging is that in the first quarter of 2017, the largest year-on-year declines in employment were recorded in the oil and gas (4,800 persons) and construction sectors (4,500 persons).

In Part 3 of this series, we look further at the Rowley Administration’s revenue position, capital spending, and the prospects that remain for the pursuit of a strong economic diversification programme.

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