The TTWhistleblower continues a series of economic analyses, ‘TT economic future hangs in the balance’ looking specifically at the current economic prospects for Trinidad and Tobago, and the fate of other nations around the world that have already experienced or now face the prospect of bankruptcy.
Since the first part of this series, a great deal of research has been ongoing on the impact of the decline on the population and the future of the economy. In this Part 5 of the series, we explore the very important sectors the Finance Minister ignored in his 2017 Budget Mid-Year Review.
A World Bank study on poverty and economic growth in 2016 drew an extremely important conclusion, one that many in Trinidad and Tobago already know – the critical importance of Small and Medium Enterprises (SMEs) to small and emerging economies.
On 20 June 2016, a feature on the World Bank study stated: “Achieving the World Bank Group’s twin goals of ending extreme poverty and boosting shared prosperity will require unprecedented efforts by developing countries to unleash private sector-led growth.”
Former US President Barack Obama, while speaking at the 2015 Global Entrepreneurship Summit in Kenya said: “Entrepreneurship creates new jobs and new businesses, new ways to deliver basic services, new ways of seeing the world—it’s the spark of prosperity.”
“International initiatives like the Global Entrepreneurship Summit and institutions like the World Bank Group will continue to play critical roles in identifying innovative approaches for supporting young, growth-oriented, and technology-enabled entrepreneurs,” Ganesh Rasagam, Innovation and Entrepreneurship Practice Manager in the Bank Group’s Trade & Competitiveness Global Practice said.
Rasagam described entrepreneurship and small businesses as “the backbone of local economies” and “important drivers of sustainable and inclusive growth.”
On 10 May 2017, Trinidad and Tobago’s Finance Minister, in delivering a now monotonous moan about how challenging his job is and how unstable the economy has become made mention of small business, retail and entrepreneurship a grand total of ZERO times!
Another signal of no economic strategy
The Rowley-led PNM Government has long been accused of having no economic strategy or vision for where Trinidad and Tobago must go, and how it must get there.
The 2017 Budget Mid-Year Review served to consolidate that view, with absolutely no mention being made by the Finance Minister on the importance of supporting and inspiring small business activity in an economy that is sliding quickly.
The increase in the level of unemployment since 2015 could be largely attributed to the closure of many small businesses that found it far too difficult to continue in an increasingly unfriendly, and over-taxed business environment.
Real unemployment figures
Imbert was dismissive about the scale of unemployment during his presentation, saying: “The unemployment rate has only risen by just over half of a percent to 4.0 percent as at the end of 2016 from 3.4 percent a year earlier. The number of unemployed persons rose to 25,500 by the end of 2016 from 21,900 the year before, or by less than 4,000. This is a far cry from the wild figure of 25,000 job losses being bandied about by Members opposite.”
Labour and business stakeholders have disputed Imbert’s numbers as a watered down version of the facts, and official publications could support their views that unemployment has increased by a much larger level than Imbert claimed.
In 2015, then Trade, Industry, Investment and Communication Minister, Vasant Bharath announced at the sod-turning ceremony for the Courts facility in Freeport that 56,000 new jobs and over 11,000 new businesses were created in the previous two years.
But what is really the case now?
In 2015, Agriculture’s contribution to GDP was $761 million. By 2016, it fell to $750 million which means less production, or less farming, or both.
In the 2016 Review of the Economy, Review of the Economy 2016 a 13% decline in jobs was found for theWholesale and Retail sub-sector of the non-energy sector.
In the second quarter of 2015, the sector employed 116,700 people, but by the second quarter of 2016, the sector employed 103,000 people.
Did 13,700 people just quit their jobs? Were they dismissed? Or were they left unemployed by the closure of the businesses for which they worked?
In the ‘Other Manufacturing’ category, the first quarter of 2015 saw 55,600 people employed, but in the same period by 2016, 47,700 people were employed – a change of 14% of people employed in this category.
In fact, the Finance Ministry published document stated at page 37: “On a sectoral basis, the highest unemployment rates were reported in: Other Mining and Quarrying (30.0%); Construction (6.6%); Petroleum and Gas (5.8%); and Wholesale and Retail Trade, Restaurants and Hotels (4.9%).”
Further, on page 39, it is clearly stated: “The fall in employment levels during the January to March 2016 period reflected job losses in: Transport, Storage and Communication (6,500 persons); Other Manufacturing (5,000 persons); Finance, Insurance, Real Estate and Business Services (3,100 persons); Construction (2,100 persons); and Petroleum and Gas (100 persons).”
An indicator also exists at Page 36 of the March 2017 issue of the Central Bank’s Economic Bulletin: “Credit to businesses remained restrained over the six-month period to December 2016. Lending to businesses was flat in December 2016, following sluggish growth in July 2016. The growth of loans to businesses was stymied by notable declines in lending to the construction (5.1 per cent), distribution (1.3 per cent) and petroleum (22.6 per cent).”
Former PNM Finance Minister of State, Mariano Browne was perhaps the most unforgiving in his commentary following Imbert’s Mid-Year Review presentation.
On the CNC3 Morning Brew, Browne said: “I guess the Minister doesn’t have many cards to play with, so when you don’t have cards, I guess you have to bluff!”
Asked whether it was “a bluffing exercise…” Browne said: “Precisely!”
Browne quickly added that “the question still remains, what’s the plan of action?” and suggested that while Imbert’s focus should be on the economy, it appears “his (Imbert’s) eyes are clearly focused on election 2020, even now as we speak.”
According to a report in the Trinidad Guardian, another former PNM Minister, Conrad Enill also had a dim view of the Mid-Year review, being reported as saying: “Notwithstanding Imbert’s promise to make a quantum leap in revenue collection through taxation for the rest of this fiscal year, Enill said he does not see anything in his mid-year budget that will have any major impact on the citizenry.”
And former Trade Minister Bharath said: “I think it’s more of the same, which is essentially more taxation through the property tax, raising revenue through gambling legislation, more sale of assets and, of course, more withdrawals from the Heritage & Stabilisation Fund. This was the Government’s methodology over the last 20 months…nothing new that would bring any level of comfort to investors, locally or abroad.”
Chairman of the Economic Development Board, Terrence Farrel also added his voice to the chorus of criticism saying Imbert’s directive to the Central Bank on prioritising the disbursement of foreign exchange could lead to a “royal mess”.
The world is looking on
As local experts weigh in, the global community is also looking on at a once powerful economy falling helplessly into a precipitous decline.
Moody’s Investor Services, in April 2017, downgraded Trinidad and Tobago’s issuer and senior unsecured debt ratings to Ba1 from Baa3 and assigned a stable outlook.
Moody’s effectively labelled our bond stock as equivalent to ‘junk’ and attributed its move to what it said was “the authorities’ policy response has been insufficient to effectively offset the impact of low energy prices on government revenues, as fiscal consolidation efforts have mostly relied on one-off revenue measures.”
The agency also cited “a steady rise in debt ratios driven by large government deficits” as a factor that has “eroded fiscal strength”.
The news and views from outside get worse though, with the Economist publication saying that Trinidad and Tobago is one of the top 10 fastest shrinking economies in the world. The only country shrinking at a slower pace than Trinidad and Tobago in the top 10 category is Greece, which is still to recover to standing on its own two feet since the 2008 Global Financial Crisis.
The Economist’s top 10 category ranks our country with others like Burundi, Timor Leste, Venezuela and Libya.
What next for the businesses still standing?
For the small businesses remaining, many must be wondering about their fate and the possibility of survival in the coming months.
A nation already in recession, showing severe signs of rapid decline could start exhibiting signs of:
- Credit Impairment and bankruptcy;
- Increased unemployment;
- Loss of accrued benefits;
- Failures in quality and service;
- Consumer frustration in products and services not being as easily accessible as before.
Already, one major signal has been the erosion of the economy’s import cover with declining foreign exchange reserves, which has tumbled from 12 months to 10 months of import cover (US$9.1 billion)