Paths to recovery

What exactly is the current state of play? Since 2008 Trinidad and Tobago entered a path of low growth and, after 2014, it has recorded negative GDP growth rates. Our economy is specialised in the production and export of oil and gas, as well as products in the oil and gas value chain. The relatively recent economic growth was largely determined by the good performance of commodity prices at international level. As at 2016 the petroleum industry (including petrochemicals) accounted for 32% of the GDP, compared to 7.8% from manufacturing. The petroleum industry is responsible for 83% of the total exports of Trinidad and Tobago and it is the chief destination for Foreign Direct Investments (87%). However, this sector only provides 3.2% of employment, with 85.4% of the workforce employed in the services sector.

We are hoping that the nonenergy sector can be transformed to generate output and revenue to eventually replace that loss from the energy sector. What is the present performance of the non-energy sector? If we look at the manufacturing sector, the Food, Beverages & Tobacco subsector represents nearly 25% of manufacturing firms working in this space, accounting for 34% of manufacturing employment and 56% of GDP of the sector. In terms of GDP, this sub-sector is followed by chemicals and non-metallic minerals with 15% (ie non-petrochemicals), printing and publishing with 11%, and assembly-type and related industries with 11%. Manufacturing exports in 2016 accounted for 13.5% of total exports and were heavily concentrated, at that time, within the iron and steel sub-sector and transport equipment for ships and boats, which together accounted for roughly 75% of total manufacturing exports in 2015. The closure of ISPATT and CENTRIN would have significantly reduced exports of this sector.

Generally, when the economy experienced a good trade performance it was driven by the petroleum industry, which presented high surpluses against trade balance deficits in other sectors. Since the financial crisis in 2008, the overall trade balance shows a downward trend.

To restructure the economy and identify opportunities for economic diversification this country must pay attention to some key issues.

We must look at diversification opportunities of particular interest that include first high-value opportunities to diversify away from commodity exports of oil and gas and related products.

Secondly, we must identify exportoriented activities (both goods and services) to assist us to balance inflows and outflows of foreign currency. This is crucial for a small open economy for which access to foreign currency is the life blood of the country. Thirdly, we must identify and develop feasible opportunities that build on current capabilities. We must partner our research capabilities in the universities with both the service and manufacturing concerns to develop a product space separate from that of the energy sector, which produces few spin offs, to create a dense product space. Fourthly our small private sector that accounts for a very small percentage of exports must select activities that would benefit from co-ordinated support from government that focuses on the global market. The development of an export capability to replace the declining energy sector is vital part of our development thrust.

We must understand the state of the economy so we cannot be fooled.

In addition, if policy decisions such as those above do not reverse the decline on government revenue the reducing employment level maybe one option to be exercised.