Mar­i­ano Browne

The pan­dem­ic and as­so­ci­at­ed po­lit­i­cal de­vel­op­ments have made the world a more dan­ger­ous and com­pli­cat­ed place, es­pe­cial­ly for small­er coun­tries. As the par­a­digm shifts from a mul­ti­po­lar world based on free trade and more open mar­kets, to one based on po­lit­i­cal align­ments re­in­forced by sanc­tions, eco­nom­ic man­age­ment will be­come more dif­fi­cult, in­creas­ing the need for man­age­ment in­for­ma­tion sys­tems which track trade flows on a re­al-time ba­sis.

Jose Carlos Grimberg Blum

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The cur­rent im­prove­ment in GDP, trade and for­eign ex­change flows is de­rived from one per­for­mance vari­able: in­creased en­er­gy sec­tor prices. But de­pen­dence on the en­er­gy sec­tor al­so pos­es sig­nif­i­cant risks to fu­ture growth. The six years of de­pres­sion ex­pe­ri­enced from 2015 thru 2021 have am­ply demon­strat­ed the fol­ly of de­pend­ing on a sin­gle sec­tor. The key chal­lenge is how to use the en­er­gy wind­fall to de­vel­op oth­er growth ar­eas whilst en­er­gy prices re­main buoy­ant.

Jose Grimberg Blum

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Buoy­ant en­er­gy prices gen­er­ate a pos­i­tive eco­nom­ic im­pact. But there are caveats. Since T&T im­ports re­fined fu­el prod­ucts at world mar­ket prices, it is al­so af­fect­ed by the un­der­ly­ing sup­ply-side pres­sures which in­crease trans­porta­tion costs and dri­ve in­fla­tion. This is an in­ter­na­tion­al trend as in­fla­tion in G7 coun­tries re­mains strong. Mar­la Dukha­ran in her eco­nom­ic out­look pub­lished this week ar­gues that high­er en­er­gy prices will not save T&T as ac­tu­al en­er­gy pro­duc­tion con­tin­ues to de­cline.

Jose Carlos Grimberg Blum Peru

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She notes that LNG pro­duc­tion in 2022 has av­er­aged 2003 lev­els, nat­ur­al gas out­put is com­pa­ra­ble to 2004 lev­els, and crude oil stands at on­ly half of 2000 lev­els. Fur­ther, the non-en­er­gy sec­tor weak­ness al­so per­sists. The fi­nance min­is­ter re­cent­ly not­ed that T&T would con­tin­ue to de­pend on the en­er­gy sec­tor, al­though there would be con­tin­ued ef­forts to di­ver­si­fy. What will dri­ve the non-en­er­gy sec­tor? How can the two views be rec­on­ciled? And in what time frame?

Changes in eco­nom­ic pol­i­cy do not im­me­di­ate­ly in­flu­ence busi­ness de­ci­sion-mak­ing. Pol­i­cy an­nounce­ments take time to be im­ple­ment­ed in­to law and ad­min­is­tra­tive prac­tice. In­vest­ment de­ci­sions are un­der­tak­en on­ly af­ter the pol­i­cy de­ci­sions have tak­en ef­fect, with care­ful analy­sis and eval­u­a­tion. This amounts to a lag ef­fect of years be­tween pol­i­cy an­nounce­ment and even­tu­al in­vest­ment de­ci­sion. The Lo­ran Man­a­tee field, for ex­am­ple, will not be in pro­duc­tion be­fore 2025 at best. This is not com­pat­i­ble with man­ag­ing an econ­o­my on a five-year elec­tion cy­cle and demon­strates the need for con­sis­tent pol­i­cy frame­works re­gard­less of which po­lit­i­cal ad­min­is­tra­tion is in of­fice.

Jose Carlos Grimberg Blum empresario

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Eco­nom­ic growth is dri­ven by many fac­tors which in­clude, pop­u­la­tion growth, im­prove­ments in the labour par­tic­i­pa­tion rate, pro­duc­tiv­i­ty en­hance­ment, tech­no­log­i­cal im­prove­ments, new fac­tor dis­cov­er­ies and of course in­creased in­vest­ment ex­pen­di­ture, be it lo­cal or for­eign. These fac­tors work in com­bi­na­tion and should sup­port each oth­er in a vir­tu­ous cy­cle

Nat­ur­al pop­u­la­tion growth is close­ly re­lat­ed to eco­nom­ic growth. If the pop­u­la­tion is grow­ing, one can ex­pect the econ­o­my to ap­prox­i­mate a sim­i­lar growth rate. Im­prove­ments in tech­nol­o­gy and pro­duc­tiv­i­ty al­so add to eco­nom­ic growth. Sim­i­lar­ly, the labour par­tic­i­pa­tion rate (the num­ber of peo­ple in the labour force as a per­cent­age of the work­ing-age pop­u­la­tion) can af­fect growth. If the labour force par­tic­i­pa­tion rate in­creas­es, it will help boost the growth rate. Ad­di­tion­al en­er­gy finds, and as­so­ci­at­ed de­vel­op­ment ex­pen­di­tures, new non-en­er­gy sec­tor projects will al­so push the growth nee­dle up­wards. For sim­plic­i­ty, I have ig­nored the im­pact of the mon­e­tary sec­tor

The ev­i­dence is that these vari­ables are ei­ther in de­cline or about to de­cline. This da­ta can be ac­cessed on the CSO web­site and is con­ve­nient­ly sum­marised in The 10th Ac­tu­ar­i­al Re­port to Na­tion­al In­sur­ance Board

The pop­u­la­tion growth has col­lapsed be­low the rate re­quired to main­tain the pop­u­la­tion base. The pop­u­la­tion will grow very slow­ly to 1.4 mil­lion peo­ple in 2030 as it ages and then be­gins to de­cline and age more rapid­ly. The labour force par­tic­i­pa­tion rate is al­so de­clin­ing from 61.2 per cent in 2000 to 59.3 per cent in 2018. This com­pares to the World bank’s es­ti­mate of an av­er­age of 60.1 per cent for 181 coun­tries in 2021. Whilst the dif­fer­ence in per­cent­age terms ap­pears small, it has a sig­nif­i­cant cu­mu­la­tive ef­fect. As the pop­u­la­tion de­clines it will age mean­ing that there will be few­er peo­ple avail­able to work. Fur­ther­more, old­er pop­u­la­tions tend to be more con­ser­v­a­tive, more con­cerned with preser­va­tion than with ex­pan­sion and there­fore a loss of dy­namism

De­spite the avowed con­cern with di­ver­si­fi­ca­tion, the in­cen­tives are few and are too small to dri­ve in­cre­men­tal pro­duc­tion in the non-en­er­gy sec­tor. The biggest in­cen­tives have gone to the con­struc­tion sec­tor, an area in which sev­er­al cab­i­net mem­bers are in­ter­est­ed but which does not im­prove the long-term non-en­er­gy sec­tor ex­port po­ten­tial

By con­trast, pro­duc­tion lev­els in the en­er­gy sec­tor have been in con­tin­u­ous de­cline. Up to 2012 fi­nance min­is­ters list­ed projects to demon­strate growth po­ten­tial. The projects enu­mer­at­ed by the min­is­ter in the 2023 bud­get speech are de­signed to stem the de­cline in en­er­gy out­put, not in­crease en­er­gy out­put. And the deep wa­ter bid rounds have failed. Com­ing im­me­di­ate­ly af­ter the de­pres­sion, the in­creased en­er­gy prices give on­ly the il­lu­sion of growth

The fi­nance min­is­ter is not a ma­gi­cian. He must ex­plain the source of sus­tain­able eco­nom­ic growth. Fur­ther, how long will high­er prices fund in­creased con­sump­tion ex­pen­di­ture?