We at the TTWhistleblower believe that a core component in restoring stability and growth to the local economy is a population that knows the truth of our predicament and becomes an integral part of the planning and hard work that goes into taking Trinidad and Tobago into the progressive future it still can have.
Today we begin an in-depth three-part analysis of Trinidad and Tobago’s declining economy – ‘Economic decline returns, with fury’ – with the intention of understanding where we came from, where we are, our prospects, and the global view of our future.
Doom, gloom and bust
Few can credibly doubt that Trinidad and Tobago’s fortunes have reversed drastically, and that today, we are far worse off than in previous years.
Even the Roman Catholic Archbishop, Joseph Harris, has seen it and with dismay was forced to concede that Trinidad and Tobago is in a much worse position at the close of 2016 than it was at the start of the year.
So stark has been our tumble backwards that Harris said on Christmas Eve than: “The economy has contracted…there are more people out of jobs. There are more people grieving because their loved ones have been killed. We are not in a very good place,” said Harris.
From stability to volatility
So if we that much worse off, we must understand where we came from in order to understand where we are now.
The continuously weakening Trinidad and Tobago economy is beset with instability and rapid decline, shrinking GDP, rising unemployment, increasing food and commodity prices and diminishing prospects of a rapid recovery on all fronts.
Today’s grim anxiety, severe hardships and loss of hope over this rapid economic slide didn’t happen overnight, a claim substantiated by a look at the facts of the recent past when the economy stood strong against successive challenges, remained stable and well buffered.
The recent past saw enviable economic factors such as headline inflation reaching as low as 3.3% by April 2014. By the post-November 2015 period, food price inflation strongly maintained its low levels at approximately 2%, with core inflation averaging the same rate.
Unemployment reached the lowest level in history at 3.7% which put Trinidad and Tobago as one of the new nations in the world to have achieved and surpassed full employment.
Reforms to the business environment saw the Balance of Visible Trade reaching levels such as $21.2 Billion in 2013.
A balance of visible trade refers to the balance of trade figures for international trade in physical goods, excluding services. And the balance of trade represents the difference between a nation’s exports and imports.
This means that we were exporting far more than we were importing and local manufacturers were on the rise. It also means that our earnings from exports were exceeding expenditure on imports.
On the crime fighting front, in the last few years we saw both Police and Politicians proclaiming that serious crime had reached its lowest levels in over 30 years, leaving many to surmise that with crime being better quelled, the space for economic progress was better protected.
Investments were strong
New strategies for Foreign Direct Investment (FDI) saw investments by foreign businesses more than tripling, reaching levels of US$3 Billion.
New markets were being opened up for local exporters with countries such as Brazil, Panama, El Salvador, Guatemala and through the CARIFORUM-EC partnership agreement. New bilateral trade and cooperation agreements were also initiated with China and India.
The ease of doing business was seen as increasingly favourable, with Trinidad and Tobago recording higher and higher rankings, being seen as a strong destination for foreign corporations to set up operations in this country.
In fact, by October 2014, Trinidad and Tobago was one of the top 10 reformers in the world among the 21 economies with the most reforms making it easier to do business
Economic buffers to guard against the onslaught of global volatility were at their strongest: Foreign Exchange Reserves stood at US$10 Billion; national savings for future generations stood at a robust US$5.7 Billion and our Financial Services Sector was becoming one of the best regulated and most powerful economic sectors in the region.
The debt to GDP ratio was also strong and manageable at 46%, defending the economy’s global credit rating and ensuring that Trinidad and Tobago could easily attract loan arrangements in the global financial markets at attract enviable interest rates.
The economic fundamentals that protect the crust of the economy were strong and resilient!
Confidence was strong
In the economy that we knew over one year ago, confidence defined the very foundation of fiscal operations and both energy and non-energy sectors.
In energy, global corporations were agreed on investing US$ Billions to develop present and new oil and gas land and marine holdings. bpTT was at the forefront, spending upwards of US$1.5 Billion in 2015.
A divestment programme which saw Initial Public Offerings (IPOs) developed to bring citizens into ownership of profit making public corporations ramped up activity on the local stock exchange as part of a capital market expansion strategy.
The First Citizens Bank and the National Gas Liquids Company (NGL), a subsidiary of the National Gas Company, went public through IPOs to citizens and were over-subscribed, giving a strong indication of an increasingly confident and investment savvy population.
Non-energy sectors, particularly manufacturing was growing at an increasing pace, expanding this country’s ability to become a net exporter of manufactured products.
Private sector credit was at robust levels with small, medium and large companies investing in plant, service and product expansion through borrowing from commercial banks, aided no doubt by increased access to new markets abroad. Private sector credit growth also reflected higher rates in the number of new small businesses.
Challenges came with a fury
The increasingly strong economic position of Trinidad and Tobago faced merciless challenges towards the end of 2014, with global energy prices hitting a slide. By January 2015, the then Prime Minister addressed the nation announcing budget and spending adjustments strategies to mitigate challenges and keep Trinidad and Tobago’s stability secured.
The price of oil slid to US$53 per barrel in December 2014 and continued its slide in 2015, yet the then Government was able to record the second highest level of revenues to keep the economy stable in 2015, without raising taxes.
Notwithstanding the impression the present Minister of Finance has tried to create, the deficit in 2015 was $3.4 billion but in 2016 rocketed to $8.4 billion (page iv of Estimates of Revenue 2017) and is projected to further accelerate to $12.5 billion in 2017.
With the onset of challenges, confidence remained intact; small and large investors held their course, and consumers expressed confidence by their use of income earnings and credit in the purchase of consumer items, home expansions, new house constructions and new and used car purchases.
Taxes were contained in order to relieve the strain on the population, and while Value Added Tax (VAT) remained at 15%, food prices were strongly controlled with a zero-rating of a number of thousands of food items.
Government revenue was impacted and reconfigured in line with lower Government spending, closing the deficit gap and maintaining economic activity with the Government proceeding with high priority projects. This would ensure that core economic activity remained at a well-managed pace.
Part of the strategy of maintaining both economic and social stability was staying the course with social spending, ensuring that families were not plunged into poverty by unemployment and a loss of social service benefits.
Change in Govt
By September 2015, Governments changed and the new administration promised but failed to deliver a clear plan to maintain economic stability, while driving growth and expansion with a clear development vision.
Energy prices remained low and the response was to increase the VAT net on food, increase fuel prices twice, ring-fence social spending based on dangerously political criteria and proceed on a strongly scripted, politically motivated cry of “hard times” and “inability to pay bills”.
It was almost as if the new Administration talked us in to further declines by insisting the economy was failing, stopping short of offering any semblance of a plan to halt decline.
Since taking office, deteriorations have been seen in food price levels, fuel costs, unemployment, local and foreign investment, declines in revenue and an increasingly unsettled industrial relations environment.
Only a few could have predicted how hopeful management of economic challenges would morph into a fiscal nightmare shaking the ground under every single household in Trinidad and Tobago.
Tomorrow we explore that nightmare in ‘Economic decline returns, with fury…Part 2, The struggling economy today…” as we look closely at the difference a year makes in an economy left adrift without map or compass for overcoming challenges and restoring growth.