Pantomime: The Election Blame Game

This article was Published in the Guardian on 20190411

Pantomime: The Election Blame Game

Since 1956 the key election rallying call has been “morality in public affairs”, or some variant thereof. During the gas boom of the 1999-2008 period this theme morphed into the need “to defend the treasury” from those who would misuse/ plunder public funds. The sub-text has always been an implied racism, “us” versus “them” as the main political parties, PNM and UNC, are identified with the two main racial groupings. Beginning in 1986 the precipitous decline in energy prices made economic performance the second, if not the most important theme. To UNC supporters the UNC has a better track record at economic management than the PNM. To PNM supporters the UNC is the epitome of graft and corruption.

These themes remain relevant today.

 After the 2010 election then Finance Minister Winston Dookeran reported that he had stabilized the economy by 2011. The reality was that energy prices ballooned in response to international developments generating a significant increase in revenues which masked the dramatic decline in gas production. International market forces were responsible for the improvement in revenues, not active intervention by the Finance Ministry.  Similarly, the 2014 collapse in energy prices, (as dramatic as the 1986 version) was due to external developments. NGC’s substantial cash reserves saved the day as did the size of the official reserves which then amounted US $11.5 billion.

In 2015, like his UNC predecessor, incoming Finance Minister Colm Imbert accused the previous government of poor economic management indicating that the economy needed to be stabilized/ turned around. Like the UNC, the PNM claims to have effected a turnaround placing the country on a sustainable growth path prompting Trade Minister Paula Gopee-Scoon to proudly proclaim last week that the recession was over. Government spokesmen have estimated the growth rate for 2018 at 1.9% and projected 2% for 2019 and 2020. These projections are based on increased gas production (Juniper and soon Angelin, the result of the UNC fiscal incentives).

Local economic commentators urging caution have been vilified by the Finance Minister claiming that they have ulterior political motives. Coincidentally, two independent reports have been published this month providing alternative, independent views to government’s narrative; Fitch Solutions’ “Trinidad & Tobago Country Risk Q2 2019” and the IMF 2019 World Economic Outlook. What do these publications say?

The IMF report provides growth estimates for 2018 and projections for 2019-2024 (page 177). The report notes that 2018 growth estimates are based on full-year energy sector data from the Ministry of Energy and Ministry of Finance, preliminary national accounts data for the first three quarters of the year from the Central Statistical Office, and staff projections for the fourth quarter nonenergy output based on available information. Growth estimates are subject to revision once the finalized data for the full year become available.

The IMF estimates 2018 growth at 0.3% in comparison to the government’s estimate of 1.9%. For 2019, the IMF projects 0.0% growth, 1.5% in 2020 and an average of 1.7% for 2021-24 compared to government’s estimate of 2% for 2019 through 2024. In other words, TT’s economic future is, at best, modest and adjusting for inflation, the economy would have the purchasing power of 2015 in 2020. Far from boom conditions, TT’s economic outturn will continue to be challenging for the foreseeable future.

The IMF numbers accords with Central Bank’s comments in the Quarterly Economic Bulletin published in January 2019. The energy sector remains the engine, but there are many strategic and structural issues that are to be addressed and could yet compromise the projected growth rates.

The Fitch Report notes that T&T benefits from being among the region's largest economies, with a well-developed hydrocarbons sector.  However, it also says "that structurally lower oil prices and a lack of policy adjustment will limit growth potential over the medium term. T&T's economy is highly reliant on exports of crude oil and natural gas, the latter of which are indexed to the price of oil. We expect lower energy prices to lead to structurally lower growth in the years ahead and a deterioration of the economy's external accounts.”  In other words, many policy initiatives are required to move the economy forward and those decision have not yet been taken.

At a seminar on re-engineering services for the Single Electronic Window at the Hyatt on April 8th, a consultant spoke candidly noting that continuing inefficiencies and bureaucracy in the public sector is inflicting damage on the TT economy. Fitch corroborates the consultant’s comments noting that "Non-energy sector development will be constrained by a weak business environment. Unless significant reforms are undertaken, government policy will underpin structural obstacles to investment outside the energy sector.” Like previous IMF reports it notes that “T&T's pegged exchange rate has not been allowed to depreciate in line with the weakening of its terms of trade, which has made its non-energy exports uncompetitive and led to chronic shortages of hard currency.”  

Demonizing Fitch, the IMF, or other commentators during the run-up to the 2020 election cannot change the reality. The “Imperatives of adjustment” written in 1981 clearly spelt out the measures to be undertaken to mitigate the precipitous decline that occurred in 1986. That report’s prescriptions remain relevant. Then, as now, the PNM prevaricated when it needed to act. So did the UNC in 2014. Parliamentarians are elected to improve things, not to be reelected. Leadership is about action not position.