Letter: Trinidad and Tobago mid-term review 2019

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Dear Sir:

The World Bank forecasts global growth, after reaching 3.1 percent in both 2017 and 2018, is expected to decelerate to 2.9 percent in 2019 and over the next two years as global slack dissipates, major central banks remove policy accommodation, and the recovery in commodity exporters matures. Moderating activity and heightened risks are clouding global economic prospects. International trade and investment have softened, trade tensions remain elevated, and some large emerging market and developing economies (EMDEs) have experienced financial market pressures.

The International Monetary Fund (IMF): After peaking at close to 4 percent in 2017, global growth remained strong, at 3.8 percent in the first half of 2018, but dropped to 3.2 percent in the second half of the year, reflecting a confluence of factors affecting major economies. Trade tensions increasingly took a toll on business confidence and, so, financial market sentiment worsened, with financial conditions tightening for vulnerable emerging markets in the spring of 2018 and then in advanced economies later in the year, weighing on global demand.

Many of Caribbean Development Bank’s (CDB) Borrowing Member Countries (BMCs) are blessed with great economic potential and growth opportunities. Economic performance in the Caribbean is set against a background of slowing global economic growth. The current international economic environment is characterised by escalating trade tensions, volatile commodity markets, and policy uncertainty with respect to both BREXIT and U.S. trade.

In spite of all these developments, in 2018 most of CDB’s BMCs recorded positive economic growth. Growth averaged 1.9 percent, an improvement on 0.5 percent in 2017. The fastest growing economies were Grenada (5.2%), Antigua and Barbuda (3.5%) and Guyana (3.4%). For Antigua and Barbuda and some of the other BMCs that were affected by the 2017 hurricane season, reconstruction efforts contributed to their upturn. CDB is projecting that real GDP growth will be 2.1 percent in 2019.

The Trinidad and Tobago economy likely performed well in the first quarter 2019. The Angelin project, which came online in late-February 2019, will have supported LNG output growth, boding well for the energy and external sectors. Moreover, domestic cement sales bounced back in Q1 2019 after contracting in Q4 2018; this suggests stronger construction activity and was likely reinforced by government measures to support the housing sector. This followed a rebound in the economy for 2018.

The energy sector accelerated last year on the back of increased natural gas production from the Juniper project; however, the non-energy sector was flat, held back by tepid domestic demand and weakness in the manufacturing and construction sectors. Developments in neighboring Venezuela and high household debt are the key downside risks. FocusEconomics panelists see growth of 1.0 percent in 2019 and 1.9 percent in 2020.

The Trinidad and Tobago original estimate of expenditure was adjusted up by TT$300 Mn., while revenue was adjusted down by TT$221.0 Mn. in the nation’s Mid-Year Review. Hence, causing an overall fiscal deficit of TT$4.57 billion, compared with TT$4.05 billion as originally budgeted for the fiscal year 2019.

Inviting investments; utilizing the nation’s natural and man-made competitive advantages: a small and manoeuvrable economy, a central geographic location, a peaceful political environment, a highly skilled and talented workforce, relatively low crime rates, an oil & gas exporter with strong foreign currency financial reserves. Investments, foreign or local, to fund entrepreneurial ideas which are judged to be or become viable and can expand existing or develop new sector or industry opportunities and jobs that will help the people, the nation, the region and other small island economies adapt to future challenges.

The executive [Cabinet] must take the lead in preparing the nation’s resilience against climate change. In insulating the nation’s data collection; Auditor General, Central Bank, Budgetary & Investment Divisions and Statistical Office from the politics. In strengthening the nation’s financial laws and the nation’s Security & Exchange Commission to meet international standards, giving a higher level of comfort to investors.

Enhancing the nation’s local Stock Exchange with new, low risks, listings that will give comfort to employees and their unions.

Offering ownership with steady capital gains to offset inflationary pressures and pay modest and dependable quarterly dividends and to utilize IPO gains, while diversifying for growth. Noting that, the objective of any budget adjustment is to better project and provide via its people and its property and its products, all society’s needs and wants:

Terrance A. Jennings

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