Business Day Editorial: Out of recession into stagnation

What’s in a name? Well, when it comes to economic descriptors, plenty.

Last week, Trade and Industry Minister Paula Gopee-Scoon made headlines when she proclaimed at a TT Manufacturers’ Association meeting that TT was out of recession. But, that’s not quite true. Technically speaking, a country is considered to be in recession if it has recorded at least two consecutive quarters (six months) of negative growth.

According to Central Bank data, TT has been in recession since December 2014. There was a brief blip of recovery for the first half of 2018, but by the third quarter, that had reversed. Going beyond technicalities is the fundamental fact that while the economy isn’t spiralling downward, it isn’t exactly gaining momentum. Instead, it’s flat. In the latest IMF global outlook, released on Tuesday, the country’s growth for 2018 was estimated at 0.3 per cent (contrary to the Government’s stated 1.9 per cent) and is forecast to grow in 2019 exactly zero per cent. The TT economy is stagnant.

Any real growth activity in the last year has come from, unsurprisingly, the upstream energy sector, spurred on by incentives implemented over half a decade ago. Inflation in TT has been hovering between one and two per cent for the last few years, and while Government claims it’s because of how it has managed the economy, the Central Bank has suggested it’s really because of dampened demand. Business credit is falling. Foreign exchange access remains a hindrance to local brands trying to increase exports. The foreign exchange rate has held relatively steady, a point of pride for Government as part of their inflation control mechanisms, never mind that the business community has constantly complained that the overvalued dollar makes TT exports less competitive on the international market. Wages have held steady while the cost of living becomes more and more cumbersome and unions have complained that new policies, especially in state enterprises, are undermining their influence. The downstream energy sector remains stymied by gas curtailments that have caused some plants to shutter and most to operate well below nameplate capacity. We’re at full employment from a technical standpoint, but so many bright young people are underemployed. Amidst all this, Government last year took the bold decision to close the 101-year old Pointe-a-Pierre refinery and restructure the state oil company, Petrotrin. The significance of the impact on the economy, especially for south Trinidad, has not yet been fully realised.

Is it any surprise then, when Gopee-Scoon made her announcement, several people reacted incredulously because they just couldn’t relate.

To its credit, Government has managed to stabilise the economy and reduce the national deficit (although there are some who criticise its methods). A Herculean task in itself, but it hasn’t really done anything else to stimulate the economy. Of course, that could change in the next year and a half because of pre-election boons, as box drains, road paving, highway construction and all manner of infrastructural projects get greenlit in time for voter suasion.

This of course, is not sustainable. For years the country has been talking about diversification and yet it remains a (gas) pipe dream. We continue to hope for hydrocarbon windfalls to save us, even when the rest of the world is looking for alternative fuel. We are perpetually stuck in a boom-bust cycle based on volatile commodity prices ­– for all our celebrations, another recession is just a plummeting oil or gas price away. After energy, what’s TT’s fall back? The mid-year budget review is next month. We expect Government will have much to say.