Much Ado About Not Much Really

IN LIGHT OF S&P's TT ECONOMIC OUTLOOK DOWNGRADE:
Much Ado About Not Much Really
In recent days, the global economic agencies have been issuing their reports and projections, those on our country included.
The IMF issued its growth projection for the TT economy for 2018 at 0.2% revising a 1.9% figure it issued at the end of 2017.  
On April 27, Standard&Poor’s projected the TT 2018 economic growth at 1.6%, still below the Finance Ministry’s projected growth for 2018.  
S&P in examining the TT economy stated, “We expect the Republic of Trinidad and Tobago's macroeconomic and external imbalances to persist over the next two years, which will weaken the country's net external asset position.”. It continued “The negative outlook incorporates the risks that these imbalances may deplete Trinidad and Tobago's external assets faster than expected, or weaken the effectiveness of monetary policy.”
Based on this overview, S&P revised its outlook on TT to “negative from stable” while maintaining its credit rating which it had revised downwards between 2014 and 2016.
The Finance Minister and his Government had questioned the credibility each time that agency downgraded the credit rating of this country and even sought to go to a new rating agency to try and disprove the S&P ratings.
On this occasion, the same Finance Minister indicated that he is “not too worried” about the S&P outlook downgrade to negative.
Minister Imbert was not now worried about S&P’s outlook downgrade boasting “..we have managed to recover most of the shortfall (in gas production)”.
This is the same Minister, along with his Government which continuously condemned the measures taken by the previous Government which has resulted in the gas production increase which will create the 3.8 billion cubic feet this year and 4 billion cubic feet projected for 2019.
The Finance Minister also sought to downplay S&P’s concern with declining foreign reserves which have been reduced by $2Billion in the last 3 years.
According to the Minister, the ‘most important thing..is that for the first time in three years we have not been downgraded (in our credit rating).
So, while Government continues deficit Budgets and continues increasing foreign borrowing, largely to meet recurrent expenditure, ballooning the net public debt to GDP ratio from 48.2% in September 2015 to 62.8% in September 2017, it seeks to downplay the depletion of the country’s foreign reserves by $2 billion.
Apart from pegging its hopes on increases in gas production which result from policy positions adopted before 2015, this Government is hoping that “oil output from Petrotrin to increase …. will contribute to “significant growth in the economy this and next year.”, the Finance Minister claimed in response to the S&P outlook downgrade.
Oil production is not anticipated to increase significantly. However, oil prices continue to rise and rose sharply and temporarily with the beating of US war drums with the threat and attack on Syria and the continuing threat of another US war in the Middle East against Iran.
The increase in oil prices, however, only results in oil price levels around the 2009 level.
Given the current levels of borrowing and draw down on Foreign Reserves, Budget Deficits and Expenditure and Transfers, it is difficult to imagine that anything more than the projected growth rates by S&P will be achieved in 2018.
The S&P downgrade of the TT economic outlook from stable to negative is real cause for concern.
The Finance Minister is not concerned about this downgrade, however.
He is concerned only that S&P has not further downgraded the country’s credit rating which will allow continued access to more external borrowing, increased Debt/GDP pressure and use of precious foreign resources to meet debt servicing demands.
The Minister makes much ado about the ability to borrow more while the possibilities of little growth of the economy resulting from possible hydrocarbon price increases more than any real increases in economic production is of much less concern.
His concerns certainly appear to be misplaced.
 
Clyde Weatherhead
A Citizen Fighting for
Democratic Renewal
of Our Society
29 April 2018