IDB notes 'severe' labour market pressures because of covid19

A new report from the Inter-American Development Bank (IDB) suggests “severe” pressures on the TT labour market because of covid19. Conditions are especially difficult for lower-income households. In its second Caribbean Quarterly Bulletin for 2020, titled The Pandemic Continues, the IDB said a recent online survey organised by the organisation in collaboration with Cornell University showed that 67 percent of low-income survey participants suffered a job loss during the covid19 lockdown, compared to only 23 per cent of high-income households and 49 per cent of middle-income households. The same survey also mapped business closures, with 60 per cent and 59 per cent of low and middle-income businesses closing, compared to 45 per cent among high-income.

Labour supply was also heavily affected, the report noted. Over the period January to May 2020 only 180 daily vacancy announcements were advertised in the non-energy sector, or half the number for the same period last year when 340 daily advertisements were recorded. The report noted, however that recent, high-frequency unemployment data are “unfortunately lacking,” so it is not straightforward to estimate the employment impacts of the covid19 crisis.

The survey also showed that Government’s social programmes have expanded, with more people being able to access the measures put in place to respond to the covid19 crisis, including food cards, salary relief grants and unemployment and rental assistance. But, the IDB said, there’s also potential to improve targeting, as middle and high income households received social benefits.

At the macro-fiscal (overall government spending) level, expenditures have shifted towards covid19 priority areas, but overall expenditures for the current fiscal year are expected to remain flat. As the authorities have kept taxation levels in place, only limited fiscal stimulus is provided to the economy

Covid19 also impacted hydrocarbon and petrochemical prices. The report said increased uncertainty, including the temporary closure of downstream petrochemical plants, will reduce the export value of energy exports, with negative implications for the country’s current account (imports versus exports). In October 2019 the IMF estimated TT would run a surplus on the current account of US$400 million (TT$2.7 billion). In April 2020, however, that was revised to a deficit of US$725 million (TT$4.9 billion). This may put additional pressure on the foreign reserves, the report said. As of May 2020, official reserves stood at US$6.8 billion (TT$46 billion), which corresponds to 8 months of import cover.

The report concluded that the covid19 crisis will likely have medium term economic consequences, which could involve sluggish economic growth, increased unemployment, rising public debt and sustained pressure on the country’s external accounts. “While Trinidad and Tobago has substantial financial buffers – the Heritage and Stabilisation Fund, large public sector assets, liquid sinking funds – to maintain macroeconomic stability in the short term, these policies are no longer affordable in the medium term. Engaging in economic diversification, enhancing the ease of doing business, improving public sector governance, mobilising non-energy revenue and streamlining government expenditures will be required going forward. At the same time there is a need to protect the poor and vulnerable from the negative economic consequences of the covid19 crisis.”