TT’s slump and a crisis of confidence

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The TTWhistleblower begins this series of analyses looking at the economic slump that the Trinidad and Tobago economy is navigating and the impact of consumer, business and investor confidence on what could possibly be a protracted crisis.

In part one, we explore the issues that brought Trinidad and Tobago to the current predicament and examine how confidence has been eroded.

TT today – a snapshot

The Trinidad and Tobago economy has had a hard two decades, navigating crises both of our own making, and as the result of ripples from the world economy.

Today in 2017, the local economy is rapidly being defined by increasing unemployment, business closures, late payments, rising taxes, increasing costs of living and four increases in the cost of transport fuel.

Prospects for 2018 are somewhat grim, with the population anticipating increased utility rates and the advance of the Property Tax, issues that are intertwined with the possibility of further job cuts by companies that are struggling to manage in an environment of political harshness without any identifiable economic strategy for recovery.

Capital projects have slowed with the efficiency in delivering public projects also suffering at the level of Government and Public Authority management and execution.

And the Government appears determined to squeeze every possible penny from the population with what appears to be a random and ad hoc imposition of taxes wherever the likelihood of more revenue shows.

In the current environment, it appears the only businesses that continue to boom are funeral homes and banks!

What the nation, and particularly the business sector is keen on knowing are the strategies for revenue expansion, investment growth and economic expansion outside of fiscal measures meant to take more out of a shrinking economy.

Key to floundering expectations amount to consumer, business and investor confidence, and here the Trinidad and Tobago Government must shoulder a significant responsibility for the waning belief that our economy’s best days are still in front of us.

Talking ourselves into hardship

Some might hold the view that Trinidad and Tobago has talked itself into a recession, while others may avoid the conjecture and look more towards the manner in which our economy is structured, where we spend, how we earn and the ability of the population to support its own advancement with jobs and investment opportunities.

But one cannot avoid altogether the manner in which the Keith Rowley Administration has badgered Trinidad and Tobago’s economy into challenges.

Back to 2015, the Government’s first words to Trinidad and Tobago through Finance Minister Colm Imbert was about this country having money for only a few days; a phrase which Imbert seems to have taken to and decided to repeat recently.

Imbert and the Government also let on early that cooperative efforts were being made to work with IMF advisors and staff in what was described as economic restructuring.

After rapid fire price increases in fuel, Imbert arrogantly laughed at his own comment that “we increased the price of fuel four times and no one has rioted, so we might increase the fuel prices again…”

What his statement demonstrated was that fuel price increases were not part of a disciplined strategy, or based on the intention of achieving some positive outcome; the fuel price increases seemed to come from the mind of someone desperately trying to survive the moment rather than preserve a future.

Confidence suffers when the absence of an economic strategy becomes apparent.

Dr Keith Rowley has not helped the situation by a continuous chorus of ‘tings bad’, without any kind of clear plan for how he intends to make ‘tings good’.

As recently as November 2017, Dr Rowley was reported in the Newsday as: “Saying this country is struggling to maintain its revenue streams, Prime Minister Dr Keith Rowley yesterday called on the private sector to “inject” their own resources to boost the economy.”

Quite apart from the obvious fact that the very nature of business is the use of its resources to grow itself and its sector within the economy it is operating, it is almost as if the Government has become accustomed to abdicating its central role in economic management.

Confidence and economy

In April 2017, it was reported in the Trinidad Guardian that: “Global business confidence rebounded in the first quarter of 2017 and is now at its highest level since the second quarter of 2015, according to the latest edition of the Global Economic Conditions Survey.”

Some years earlier, a New York Times article spoke of the direct impact of confidence on economy and the fact that consumer confidence was important to completely rise out of the rubble of the 2008 Global Financial Crisis, stating: “Clearly, confidence can change awfully fast, and people can suddenly start worrying about a stock market crash, just as they did after 2007.”

Here at home, the Central Bank of Trinidad and Tobago Economic Bulletin of September 2017 dove immediately into issue of global recovery and the core pillars of that recovery, stating: “The world economy gained momentum during the first half of 2017. Growth in the United States (US) remained solid given stronger private consumption and investment, while growth in the Euro area and Japan were buttressed by robust domestic demand.”

However, the pace of economic activity slowed in the United Kingdom (UK) on account of a decline in the production sector. The uncertainty surrounding Brexit negotiations and the outcome of a hung Parliament following the snap general election of June 2017 can further affect business and consumer confidence and dampen growth prospects.”

Clear then how confidence can strangle growth prospects, but the Economic Bulletin goes further in its analysis of the local economy, highlighting that labour conditions deteriorated, and inflation remained contained, but largely due to subdued economic activity

The Government’s deficit stood at an alarming $12.1 billion for the first 10 months of Fiscal 2017, even as: “The prices of Trinidad and Tobago’s major energy export commodities improved during the period January to August 2017.”

More than that, the Bulletin stated: “Despite higher energy receipts, total revenue fell by $5.6 billion largely on account of lower receipts from the non-energy sector, particularly non-tax revenue and capital revenue.”

While taxes have increased, spending has been cut, subsidies reduced and projects slowed, energy revenue increased on price conditions, but capital and non-tax revenue declined, together with receipts from the non-energy sector.

Could this be another indicator of an economy operating without any kind of strategic compass for recovery? Because with a recovery in energy prices, the non-energy sector could be buckling under a crisis of confidence, which is reducing its input into the economy through Government’s fiscal measures.

Trinidad and Tobago has over time enjoyed a growing space in the global economy, as in investment destination in both energy and non-energy and our financial services sector is possibly the most sophisticated in the Caribbean region.

And if the global economy is showing strong signals of recovery and moderate growth, how it is that our part on the global economy is not redounding to the benefit if the local private sector and Foreign Direct Investment?

Is it that confidence is growing, but not for Trinidad and Tobago’s economy?

In part 2 of this series, the TTWhistleblower will look deeper into the issues that are affecting revenue, and establish the connection between the economy’s income and the confidence of consumers, local businesses and foreign investors.

 

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