Friday, April 12, 2024

THE HOYOS FILE: No country for falling oil prices


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TRINIDAD & TOBAGO’S (T&T) economy, the once and still mighty financial battleship that cruises these Caribbean waters, bringing supplies of food and dinosaur energy to its geographically smaller and economically weaker neighbours, now faces the kind of attrition it has not been accustomed to for decades.

The purpose of that little preamble is simply to introduce my summary of a snapshot of the T&T economy written by the talented group economist for RBC, Marla Dukharan, who seems to have that burning desire to communicate that you find in the best journalists.

Writing in RBC’s Economic Outlook newsletter, Dukharan says that as the socio-economic effects of lower oil and gas prices – as well as record low production – begin to be felt in T&T, there is public disagreement on whether or not the economy is in a recession.

The situation makes it seem unrealistic to hope for a reliable, official macroeconomic outlook, says Dukharan, and therefore, in empathy – which, she said, was not to be confused with ‘advice’ – RBC’s Economic Outlook offered to summarise in its January edition its “best guesses” for how the T&T economy will fare over the next 12 to 18 months.

It is expected, she says, that official data could eventually confirm that the T&T economy contracted by roughly two per cent in 2015, and the newsletter says a further one to 1.5 per cent contraction is likely in 2016. And if oil prices remain below US$40 per barrel into next year and production levels remain weak, growth in that year will stay close to zero.

Dukharan adds that Central Bank of T&T (CBTT) data show that the Trinidad dollar depreciated by 0.9 per cent in 2015 to close the year at almost TT$6.45 to one US dollar, and could continue to depreciate in 2016, but hopefully at a measured pace.

The level of official reserves could also decline further, having closed 2015 13.5 per cent lower at US$9.8 billion, according to the CBTT, which she estimates at roughly 11 months of imports.

She notes that in the half-year budget update scheduled for April, Minister of Finance Colm Imbert may announce a smaller budget closer to TT$55 billion, with a higher fiscal deficit. As a result, government borrowing could also be higher than budgeted. Gross public sector debt is currently TT$115 billion or 68 per cent of GDP.

The unemployment rate could also increase if private sector layoffs intensify, and, writes Dukharan, “if the government adheres to its plan to balance the budget by 2018”. Inflation could also climb in early 2016, if US dollars remain scarce, if the majority of value added tax exemptions on food items are removed as planned today February 1, and if the fuel subsidy is further reduced, pushing gasoline and diesel prices up again.

As you can see, the same thing which is saving Barbados’ economic bacon right now – drastically lower oil prices – is pulling down the powerhouse next door. Both countries are at the mercy of events completely out of their sphere of influence, as Saudi Arabia tries to shove American shale and fracking interests out of the oil business by waging a war of attrition that is affecting the entire globe.

And while your humble columnist is biologically half-Trinidadian, my late, beloved mother being a Hospedales from Sangre Grande, I am socio-economically and culturally 100 per cent Bajan.

And I have a confession to make: I have not yet been able to bring myself to feel much sympathy for the economy of T&T. I know, it’s a bad thing to admit. But that is the country which haughtily declared it was not going to be an ATM machine for the Caribbean countries in its midst, and which never offered any of us a discount on oil prices, even when they hit over US$100 per barrel. It did not set the prices, to be sure, it was only charging what the world price was.

T&T watched Venezuela introduce Petrocaribe, perhaps partly for the wrong reasons, without turning a hair on its economic head. At least Venezuela recognised that oil prices were killing us, and its late president Hugo Chavez tried to do something about it.

Meanwhile, with oil revenues flowing in, the T&T economy went through boom times, allowing already highly-subsidised manufacturing companies to throw off so much cash that they were able to create financial groups which looked at vulnerable Barbados with a gleam in their corporate eye.

They began to buy up as much real estate and public companies as they could in Barbados, in the process decimating not only our dreams for economic wealth, but stunting the growth of many a small Barbadian manufacturer, and causing others to barely hang on for dear life from the retail pressure unleashed on them.

Barbados became an economic province of Port of Spain, remaining so until the telecomms sector a decade ago, and more recently, the hotel sector, began to bring some sort of balance back to the list of corporate investors in this country. As for Barbadians standing on the commanding heights of their own economy, they can be counted on the fingers of one hand.

Barbados will always be a place where foreign interests will own the majority of the country, as we don’t produce enough wealth from natural resources to trickle down to everyone. But in the meantime, I am glad that we have been given some sort of respite, even if it comes from a country which could care less whether we live or die, referring of course to Saudi Arabia.

In this mean old world, you take whatever good you can get, no matter from where it may come.


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