let me start by congratulating Mr Larry Howai on his well deserved appointment as Minister of Finance and the Economy. The Honourable Senator is certainly a man of excellent reputation, and fairly or unfairly so, the expectations will certainly be mounting that he will be able to transform the sluggish economy overnight. The reality is that the economy is in need of policy actions that will help us avoid the dreaded stagflation curse and reignite economic growth.
Expectations are such interesting things. As an economic concept, the expectations of individuals and businesses about the future of different economic factors such as market prices, incomes, profits and taxes, and growth; affects the very economic values that are being considered. Expectations directly impact how an economy develops in the future. For example, if a businessman expects the economy to slow down he most likely will not invest in additional plant and machinery, inventory or workers. His decision to not invest will in turn indirectly affect the broader economy and will result in the economy slowing down. Thus, his initial expectation and resultant choices ultimately makes the expectation a reality.
The economy influences expectations and expectations influence the economy, the relationship between the two is delicate and as such a change in one affects the other. For these reasons, business confidence and the expectation of economic growth are critical to getting the economy booming again.
Our newly minted Honourable Minister of Finance and the Economy is coming into the role with a great deal of credibility, goodwill and the expectation that he will deliver economic growth and transformation. My great hope is that this currency bestowed to him will be well spent in both managing expectations and in executing much needed directives that will result in both short-term and sustainable prosperity.
The state of the economy is reflected in the words of Charles Dickens from his classic tale, Great Expectations: "There was a long hard time when I kept far from me the remembrance of what I had thrown away when I was quite ignorant of its worth." These words capture our economic circumstances and the policy decisions that have gotten us here. We have long been a nation dependent on a single sector for our well being be it sugar, then oil, then gas, and now oil again? For decades, there have been cries and shouts for economic diversification and for us to wean ourselves off of the teat of the energy sector and to truly prepare ourselves to be a competitive and well positioned economy.
What is keeping us from achieving the goals of diversification and sustainable growth?
In my mind we have all the ingredients to achieve these ambitions and to build a nation that is able to within stand the economic cycles to come and be a competitive force in the Western Hemisphere if not the world. Trinidad and Tobago is certainly faring better than our neighbours in this global economic decline; and we certainly have the balance sheet and foreign exchange reserves to not only withstand economic shocks but to stimulate the economy in the short-term. Let us not squander the opportunity that we have before us.
As it stands right now, "Trinidad and Tobago Inc" is on a course towards the curse of stagflation.
Stagflation is a condition where economic growth is slowing with rising unemployment – thus the economy is stagnant – that is accompanied by a rise in prices – or inflation. Stagflation occurs when the economy isn't growing but prices are; which is not a good situation for the country to be in. The most recent Central Bank reports show that the economy continues to contract, fewer persons are reported as being employed (although the unemployment rate has improved – the magic of statistics) and that Headline Inflation has crept upwards from 11.8 per cent to 12.6 per cent. In other words we are staring down the barrel of the Stagflation gun. Slowing growth and rising prices, especially on food items (which have increased on average by 28.3 per cent) affects each of us as citizens; this isn't economic theory, this is reality.
To his credit I believe that the Hon Minister of Finance and the Economy has a clear understanding of the state of affairs and the actions required to move us forward. There is need for a portfolio of policy actions that will treat with short-term and long-term needs. There is an immediate need for us to stimulate the economy in order to kick-start growth and create jobs. But of course, our actions cannot only be short sighted, but must include initiatives that translate into sustainable growth, development and competitiveness.
I was very pleased to see that the Hon Minister articulated that economic growth has to be considered in three phases: short-term, medium-term and long-term. He outlined that in the short-term, the focus will be on infrastructure and capital projects. I certainly agree that these areas will provide an immediate shot in the arm for the economy provided that local materials, services and labour are significantly used and that the potential "leakage" is minimized.
In the medium-term, the focus will be on the downstream of the energy sector, and on the manufacturing and tourism sectors. This approach will certainly shore up the energy sector and related services and will improve both employment and trade. However, we will still need to remove the perennial blockages to doing business in T&T and we will have to invest in improving the tourism product on offer, including the hotel stock and our customer service quality.
Finally, the third phase presented is the investment in our human capital development and other areas of the economy. This third phase is the most critical of the three to the future and well being of our nation. The policymakers have made education more affordable and accessible but beyond this we need to strategically determine what areas should be invested in for the Trinidad and Tobago of the future. What technical skills and capabilities will be required of our human capital 20 years from now? The harsh reality is that the development of a nation is directly correlated to the capacity of its people. Strategically, we need to determine "what is the T&T Inc of the future?" and work backwards from there.
Along with many others from all sections of society, I have full faith in the Hon Minister to deliver on the balanced growth required and to implement the deliberate and difficult decisions needed.
Honourable Minister, may you always be a man of sound character, good judgment and bold courage.
Sir, may God's grace and wisdom be with you.
Jason Julien is a Financial Analyst and Registered Trader and can be contacted at: email@example.com or followed on Twitter at: @julienomics
DISCLAIMER: THE VIEWS AND OPINIONS EXPRESSED HERE ARE SOLELY THE VIEWS OF THE WRITER AND DO NOT NECESSARILY REFLECT THE VIEWS AND OPINIONS OF THE PUBLISHER OR ANY OTHER COMPANY OR INSTITUTION AFFILIATED WITH THE WRITER IN ANY WAY.