It will take months to quantify the full economic impact of the Covid-19 pandemic but the signs already indicate the need for major adjustments all around.
These are unquestionably uncertain times as evidenced by the 53 per cent mood of uncertainty picked up by the Market Facts and Opinions (MFO) Covid-19 Consumer Outlook Study 2020 released on Tuesday. This represented an almost 100 per cent increase over last year, which should be no surprise given the enormity of the crisis now gripping 212 countries and territories around the world.
For many, the current hiatus from the routines of life has dissolved the comfort of certainty about job security, business survival and confidence in the future. The 38,000-plus applicants for salary grants and 30,000-plus applicants for income support are among those perched at the tip of the fearful unknown coming around the corner. For them, as for the rest of the population, much will depend on whether the Government’s recovery plan can inspire public confidence in a situation where so many factors are beyond the control of this country.
The externally-propelled nature of the economy puts Trinidad and Tobago at the mercy of foreign decision-makers, a case in point being this week’s decision by Nutrien Ltd of Saskatchewan, Canada to temporarily shut down one of its four ammonia plants at the Point Lisas Industrial Estate due to depressed market prices. It was the third petrochemical plant to be closed at Point Lisas this year, following Yara’s shutdown and Methanex’s decision to idle its Titan plant.
In Tobago’s tourism economy, all eyes are on the aviation industry. Virgin Atlantic, which brought visitors from Gatwick Airport in England, is in trouble and seeking a bailout from the British government. It plans to cut 3,150 employees and exit Gatwick. The much larger issue for the Tobago economy, however, is the global uncertainty surrounding the re-opening of national borders around the world, consumer fear about coronavirus contagion at airports and on airplanes, and general recessionary conditions.
The economic upside for both Tobago and Trinidad is the fact that unlike some of its Caricom partners, this country has a rainy day fund in the form of the Heritage and Stabilisation Fund (HSF). The Government’s planned withdrawal of roughly TT$10 billion from the HSF provides a cushion from which to stimulate the economy by accelerating the construction and manufacturing sectors.
Construction, in particular, is the go-to sector for revving up the economy because of its strong backward and forward linkages and pull-and-push impact on productivity and employment. However, while the Government would be eager to back construction projects as economic stimulus, it faces a real challenge of timing given the urgency of current needs, especially in the services sector which contributes more than 65 per cent to national employment.
Until the global economy finds its balance, and when that will be is anyone’s guess, the weight of carrying the economy will increase on the state whose already dominant role will become even more central. In this context, policy clarity and strong institutions for accountability and transparency will be pivotal in ensuring efficiency of expenditure and value for money. The old ad-hocracy must give way to precision planning and professional management and execution.