CONTACT Magazine (Vol.18 No.3 – December 2018)

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STATE OF THE NATION The economic outlook The region: Latin America and the Caribbean According to International Monetary Fund (IMF) reports, challenges have been mounting in a number of emerging markets and low-income countries, including some in Latin America. Many of these economies are feeling pressures from a stronger US dollar and a tightening of financial market conditions. Facing capital outflows and trade disputes, they could deliver a shock to a wide range of emerging and developing economies. 1 For example, Argentina recently experienced a currency crisis, and Brazil has faced lower business confidence and continued political uncertainty. Prospects for FDI in Latin America and the Caribbean are expected to improve in 2019. The IMF has a slightly more optimistic projection than the World Bank. FDI growth forecasts, Latin America and the Caribbean (%) 2018 2019 IMF 2.0 2.8 World Bank 1.7 2.3 The domestic landscape The IMF has predicted that the energy sector will grow by 6.0% in 2018 and 2.4% in 2019 (Article IV Mission Concluding Statement for Trinidad and Tobago). But the non-energy sector was predicted to contract by 1.8% in 2018 and show zero growth in 2019. 2 Trinidad and Tobago growth forecasts (%) Real GDP growth 2018 2019 IMF 1.0 0.9 World Bank 1.6 1.9 Sector growth (IMF) Energy sector 6.0 2.4 Non-energy sector -1.8 0.0 2019 budget Trinidad and Tobago’s national budget for the fiscal year 2018-2019 was presented on 1 October by finance minister Colm Imbert. 3 He estimated total revenue at TT$47.724 billion (oil revenue $9.518 billion, non-oil revenue $35.197 billion, capital revenue $3.009 billion). The IMF has predicted that the energy sector will grow by 6.0% in 2018 Expenditure was estimated at $51.776 billion (see sidebar) net of capital repayments and sinking fund contributions. The fiscal deficit for 2019 is expected to narrow to $4.052 billion or 2.5%. Major projects announced in the budget are expected to stimulate economic activity and contribute to economic transformation. They include the Sandals Golden Grove project in Tobago, a competitively-priced steady supply of natural gas from Venezuela’s Dragon Field, two new fast ferries for the seabridge, radical changes at Petrotrin (the Petroleum Company of Trinidad and Tobago), and a new dry dock and ship-building/ship-repair facility at La Brea. The last is a collaboration with China Harbour Engineering Company Limited (CHEC), and was signed on 7 September. It is projected to generate approximately US$500 million annually, which would represent a 2.4% addition to T&T’s GDP. During the four-year construction period, it is expected that 3,500 direct and 5,700 indirect jobs will be created. 4 The finance minister maintains that the creation of a growth-inducing environment that promotes macroeconomic stability and confidence is a key condition for ensuring that recovery takes hold in the non-energy sector. 44 Trinidad and Tobago Chamber of Industry and Commerce www.chamber.org.tt/contact-magazine
Trinidad and Tobago: expenditure 2018-2019 TT$ billion 7.392 6.120 5.695 3.546 3.182 1.760 1.033 0.780 EDUCATION & TRAINING NATIONAL SECURITY HEALTH WORKS & TRANSPORT PUBLIC UTILITIES RURAL DEVELOPMENT & LOCAL GOVERNMENT HOUSING AGRICULTURE The global context 5 Global growth was projected to reach 3.8% in 2018 and 3.9% in 2019, according to the IMF’s April 2018 World Economic Outlook (WEO). But growth seems to be slowing, and the outlook is becoming less certain. The rate of expansion appears to have peaked around July 2018 in some major economies, and growth has become less synchronised. The United States In the US, near-term momentum is strengthening in line with the April WEO forecast, and the US dollar has appreciated by around 5% in recent weeks. The recent tariff increases on Chinese products and retaliatory measures by trading partners have increased the likelihood of escalating trade actions. These could derail the recovery and depress medium-term growth prospects, both through their direct impact on resource allocation and increased uncertainty for investors. As for oil prices, the US Energy Information Administration has estimated in its short-term energy outlook that West Texas Intermediate oil will average US$67.36 per barrel in 2019. The World Bank is forecasting a similar WTI oil price of US$67.40. The rest of the world Growth projections have been revised downwards for the Euro area, Japan, and the United Kingdom, reflecting negative shocks to economic activity in early 2018. There have been escalating trade tensions and market pressures on the currencies of some economies with weaker fundamentals. The UN states that intensifying trade tensions between the major economies pose a significant risk to the global growth outlook. Foreign direct investment (FDI) According to UNCTAD’s 2018 World Investment Report, weak FDI growth rates will continue for 2018 and can still result in an upswing in the global economy. In practice, FDI in LDCs remains heavily concentrated in a few countries, especially in the extractive industries. Directing FDI towards the longer-term infrastructure and diversification needs of LDCs remains an important policy challenge. Debt Global debt, both public and private, has reached an all-time high of $182 trillion, almost 60% higher than in 2007. This buildup has left governments and companies more vulnerable to a tightening of financial conditions. Emerging and developing economies are already feeling the pinch as they adjust to monetary normalisation in the advanced world. This could lead to market corrections, sharp exchange rate movements, and further weakening of capital flows. Emerging economies, excluding China, could face debt portfolio outflows of up to $100 billion, which would broadly match outflows during the global financial crisis. 6 1 Lagarde, Christine, and IMF. “‹Steer, Don›t Drift›: Managing Rising Risks to Keep the Global Economy on Course.” IMF, 1 October 2018. www.imf.org/en/News/ Articles/2018/09/27/sp100118-steer-dontdrift. 2 “IMF Executive Board Concludes 2018 Article IV Consultation with Trinidad and Tobago.” IMF, 25 September 2018. www. imf.org/en/News/Articles/2018/09/25/ pr18356-trinidad-and-tobago-imfexecutive-board-concludes-2018-articleiv-consultation. 3 Budget Statement 2019. Ministry of Finance, 1 October 2018. www.finance.gov. tt/budget-statement-2019/#estimates. 4 Paul, Anna-Lisa. “La Brea, Point Fortin Residents Anxious for Dry-Dock Project.” Trinidad Guardian, 22 September 2018. www.guardian.co.tt/n/la-brea-pointfortin-residents-anxious-for-drydockproject-6.2.673878.fa99ee0e28. 5 “World Economic Outlook Update, July 2018: Less Even Expansion, Rising Trade Tensions.” IMF, July 2018. https://www.imf.org/en/ Publications/WEO/Issues/2018/07/02/ world-economic-outlook-updatejuly-2018. 6 Lagarde, Christine, and IMF. “‘Steer, Don’t Drift’: Managing Rising Risks to Keep the Global Economy on Course.” IMF, 1 October 2018. www.imf.org/en/News/Articles/2018/09/27/ sp100118-steer-dont-drift. www.chamber.org.tt/contact-magazine 45 Trinidad and Tobago Chamber of Industry and Commerce
Page 1 and 2: Vol.18 No.3 - December 2018 The Voi
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Page 9 and 10: A note from the editor Exports play
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CONTACT Magazine (Vol.18 No.3 – December 2018)

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