A budget preamble
With no positive economic growth over the past few years our Government is now concerned about stimulating the economy even though the claim is that our economic fundamentals are good—foreign reserves, unemployment, debt to GDP ratio, exchange rate stability and inflation.
However, in the circumstances of a stagnating energy sector (reduced income, dropping oil and gas production), high local market liquidity, low velocity of money (little private sector investment), Government, by way of a third deficit budget, is planning in the interim to spend on capital projects, attract foreign investment, to increase efficiency of its overall spending, as economic drivers. The short to medium term hope is for the energy sector recovery via higher world oil and gas prices—though oil production is falling—new downstream investments in petrochemical plants, while the current bid round will provide the resources that can sustain the sector.
In other words, the economic strategy is traditional; an upswing of the global price cycle for petroleum, the resources will be there and the boom will return. Hence the discussion in the country is at the ground level, focussing on austerity, efficiency in Government spending, phased reduction in subdidies and transfers, no new taxes that could hurt foreign investment, stimulating the economy by Government investment in construction and even improving our various ratings in the recent competitive index.
This strategy addresses the symptoms of the two major economic crises before us. The first is in our energy sector; with peak oil and even gas; moreso given the surfeit of cheap shale gas in our traditional markets that threatens both our LNG and petrochemical sectors. The other is the need for us to put new and innovative goods and services on the uncertain global market for which we are very unequipped. The budget ignores the bigger picture at our economic peril.
Mary K King