Balancing the narrative on the state of the economy

By Dr Marlene Attzs, Economist

Email: marlene.attzs@gmail.com

Over the past week, there was a buzz in the country around the state of the economy.  The impetus for the various conversations was two-fold: first, the International Monetary Fund (IMF) concluded its Article IV consultations on Trinidad and Tobago. Second, the Minister of Finance presented his mid-year budget review to the Parliament on Friday, June 7.

By way of context, all member countries of the IMF participate in the Article IV consultations, an annual discussion, between an IMF Team and Officials from the specific country, on economic developments and policies in the country.  The IMF is provided with economic and financial information by the Ministry of Finance, the Central Bank, and other relevant sources.

The mid-year review, on the other hand, is a Supplementary Appropriation (where the Minister of Finance seeks approval for extra funding for Government) and a mid-fiscal-year account on how revenues and expenditures have or have not been realised in accordance with the estimates presented during the budget speech.

Two weeks ago, having reviewed documents provided by the Trinidad and Tobago officials, the IMF Team issued its report and noted “Trinidad and Tobago is undergoing a gradual and sustained economic recovery… Economic growth is broad based, led by the non-energy and energy sectors, while inflation is low… economic growth is projected to gain momentum in 2024”.

In presenting his mid-year budget review on June 7, Minister of Finance Colm Imbert naturally shared the IMF’s review of the encouraging signs of economic growth in the local economy.

Juxtapose the IMF’s review with the Minister’s statement in an affidavit he recently filed (also in early June). Minister Imbert cautioned that, “The fall in oil and gas prices and lower than expected production of oil and gas has had a profound impact on the country’s petroleum revenues, leading to a projected shortfall in revenue for 2024 of $5 billion. … the country’s deficit for 2024 is now expected to be as high as $9 billion… In fact, unless additional tax revenue can be collected …the Government will soon be faced with very difficult choices in terms of maintaining the current levels of subsidies, grants, free services and social programmes”.

The next three years will be very challenging for the country from a revenue perspective, the Minister cautioned.

In trying to find a balance between the IMF’s report, Minister Imbert’s acceptance of that report and his subsequent caution about the state of the Government’s finances, here are some of the interwoven strands of the national conundrum we face.

First, while some economic growth is acknowledged, the Government simultaneously sounds caution that it may have to face difficult choices in terms of “…maintaining subsidies, grants, free services and social programmes.” (incidentally the Chronic Disease Assistance Programme [CDAP] was mentioned by the Minister of Finance as putting a “strain” on government expenditures).

Second, the budget for 2024 now stands at a whopping $61.5 billion dollars, one of the largest in our history (the additional $2.3 billion – primarily for recurrent expenditures such as salaries and legal fees – plus the 59.2 billion that was approved in October 2023). The deficit has also grown from $5.2 billion to $9 billion.

Third, we continue to convulse at the growing levels of crime that is unmatched only by the rising cost of living. Fourth, all businesses—big and small–are complaining about the lack of FOREX to fuel their businesses. Fifth, the lamentation “de people want water” remains ever-present while consumers ‘brakesin’ for property tax and higher electricity bills.

The Government may be pleased with the IMF’s conclusion that there is a “gradual and sustained economic recovery” and that may also be a good sound bite going into an election year. The fact remains however that the average citizen is not feeling the recovery or the growth.

Economic prosperity is a dynamic and complex phenomenon that looks at various dimensions of societal advancement—it is more than large budgets.  Economic growth should typically provide a gateway to improved living standards for the population.

I quite suspect that many in our country are not feeling that their living standards are improving. On this score I eagerly await the release of the Household Budgetary Survey and the Survey of Living Conditions from the Central Statistical Office (CSO), so we can have robust data on what has been happening with respect to living conditions.

For now, the economic future looks bleak even though history will show the government recorded one of the highest levels of expenditure alongside a 9-billion-dollar deficit.

We always should strive for a balanced narrative – while GDP (economic growth) is an important measure of economic activity, it does not capture the full picture of human well-being or hardships.

Economic policy always should consider both economic output and the quality of life enjoyed by the population to ensure that growth benefits everyone.

That’s just my point of view!