Hosein questions government's economic growth projections

GIVEN the current dynamics of the local economy, senior economist, Dr Roger Hosein is sceptical that the country can maintain its projected trajectory of two per cent growth for 2019.

Hosein, who is the head of UWI St Augustine’s Economics Department, spoke to Newsday following the Prime Minister’s national report yesterday. He said the government’s projections have not taken into consideration downward revisions in energy commodity prices, especially oil, increased debt, and the impact of the closure of the Pointe-a-Pierre refinery on the fenceline communities and overall productivity.

“It is against the backdrop of all of the above that I was surprised to see a growth rate of close to two per cent presented by the PM last night. Its possible I may be wrong, but the numbers to me, don’t point in that direction,” he said. He gave the breakdown.

In September, the International Monetary Fund (IMF) suggested that if oil prices improved to US$70 in 2018 and held at about US$69 per barrel in 2019, along with natural gas prices at US$2.80 per mmbtu, then the TT economy will grow by US$6 billion in 2019, international reserves would dip to US$6.9 billion (from US$11.5 billion in 2014) and external public sector debt would climb to 16.9 per cent in 2019 (as compared to 8.6 per cent in 2014) while the current account balance would record a surplus of 7.3 per cent in 2019 (as compared to 14.7 per cent in 2014). The current account refers to the difference between a country’s exports and imports.

In December, however, one of the leading energy forecasters, the US government’s Energy Information Administration lowered its 2019 forecast for oil to US$54 per barrel, US$11 lower than the TT government’s budget predicate, while natural gas will be US$3.11 per mmbtu.

“Let us for simplicity assume that these expected trends oil and gas cancel each other out, then the 0.9 per cent growth assumed by the IMF for 2019 is still possible. However, that forecast did not take into account the closure of the refinery and the associated demultiplier effect on the host community and the rest of the economy,” he said. Hosein said he was not able to acquire the refinery’s contribution to the country’s GDP from the Central Statistical Office, but his guess was impact of its closure would stall real economic growth in 2019 to between 0.5 per cent and 0.8 per cent, with risks tilted to the downside, given that the West Texas Intermediate oil price (on which TT’s budget is based) actually averaged US$46 for January, much lower than projections, although gas prices fell within rage. If the trend continues, it will impact growth and forecasts for the economy will likely be lowered.