The 2011 and 2012 budget speeches by the Minister of Finance, Winston Dookeran spoke expansively about stabilising the economy and creating a platform for growth. This year he spoke of "blue skies" and "green shoots", meaning that economic recovery was on the way. But the Minister returned to Parliament twice presenting supplementary appropriation bills increasing recurrent expenditure and the deficit. Interestingly, he was always silent on the revenue situation.
In presenting the Supplementary Appropriation Bill for 2012 last month, he indicated that the economy was neither in a recession, nor in a slump, saying that the press had overreacted to the Ce tral Bank Governor's report on the performance of the economy. He was supported by the Minister of Energy who put a positive spin on all the maintenance work and activity that was now taking place in the energy sector. Noticeably, however, the auctions for drilling rights in the deep waters of the Gulf of Mexico were successful this week whilst our efforts to date have been lukewarm.
Mr Dookeran also spoke positively about the Government's capacity to make hard decisions, when necessary. But what is the reality?
A review of world events last week presents a stark contrast to what the Minster outlined.
The US Federal Reserve Board ended its regular two-day review meeting on June 20. In its release it warned that global financial strains continued to pose "substantial downside risks" to the economic outlook. The Fed cut forecasts for US growth by .5 per cent and opted for a more "benign" strategy of selling short term securities and whilst purchasing longer dated securities.
The IMF's managing director, Christine La Garde, again warned the growth prospects for all economies would be lower. Europe remains the central source of uncertainty and risk, and the Eurozone is officially in recession.
The possibility of a catastrophic breakup of the Eurozone has receded (temporarily) with the outcome from Greece's elections. But the Eurozone crisis will not go away and as the recent experiences of Spain and Italy have shown, another banking crisis looms large. Greece may have a new government, but it faces the same old problems of implementing the terms of the bailout package.
On June 19, the G20 meeting (the leaders of the 20 largest economies in the world) concluded with a commitment to solve the most immediate risk, the Euozone debt crisis. But the only concrete proposal to deal with the crisis was to offer the palliative of reducing borrowing costs.
But how does one lower borrowing costs when governments are perceived as risky and the markets are calling the shots? This is a plaster and not a cure and the Eurozone will continue to be a source of uncertainty for the foreseeable future. Financial markets understand risk but become volatile when dealing with uncertainty.
Also, growth in China has slowed. This month the Bank of China lowered interest rates to stimulate the economy. World commodity prices (oil, flour, wheat, soy beans, steel and other minerals), which rose largely as a result of the increased demand from China, are now falling. Capital expenditure plans for the international mining giants are being cancelled as major corporations take a more conservative view of the world demand.
On this basis, the downside risks Governor Williams identified in his speech remain as stubborn as ever.
The facts do not support Minister Dookeran's theory of "blue skies". So how does the Government plan to deal with three successive quarters of negative growth (which is the definition of a recession), or the three years of economic decline and with 2013, the fourth year of deficit financing? Indeed under this administration, the deficit has grown and with it, national debt as a percentage of GDP has risen from 34 per cent to 50 percent-plus and is climbing.
There has been no turnaround, stabilisation and no platform for growth.
Energy prices are falling internationally. Switching LNG exports to other, higher priced markets has worked well since 2008, as the US market is no longer attractive for T&T exports of LNG since shale gas has forced prices to rock bottom. But this solution, whilst buying time in the short run, cannot last indefinitely. A day of reckoning will come.
Foreign exchange reserves are as strong as they were on assuming office. This aside, in economic terms, this administration has achieved little or nothing since coming into office.
There is no fiscal space to initiate a stimulus package and to do so would lead to an increase in imports and a decline in foreign exchange reserves.
As expenditures in the last two budgets have increased, taxes can't be cut as that would only serve to increase the deficit. And monetary policy is a blunt instrument. Interest rates have fallen and the banks are flush with cash, but loan demand (borrowing) remains weak. That translates in low private sector investment and weak capital formation.
There have been vague programme announcements which tried to purchase stability and confidence on the cheap without success. One cannot diversify the economy with talk. It requires concrete plans and long term programmes (Colour Me Orange does not count as investment) and such projects as were inherited are delayed.
Now we have had a cabinet reshuffle and a new Minister of Finance.
With each passing day the Hans Christian Anderson fairy tale in which the emperor (empress?) was found to be wearing no clothes becomes more relevant.
• Mariano Browne is a former