Feature Address – Senator the Honourable Larry Howai
Thank you Chairman.
Senator the Honourable Kevin Ramnarine, Minister of
Energy and Energy Affairs;
Mr. Roger Packer, President of the Energy Chamber;
Dr. Thackwray Driver, CEO, Energy Chamber;
Distinguished members of staff of the Energy Chamber;
Specially invited guests;
Members of the media;
It is indeed a pleasure to be invited once again to share some remarks with you on the state of the Trinidad and Tobago Economy.
Let me first thank and congratulate the Energy Chamber and the various organizations and sponsors of this most important two-day conference for convening this meeting of some of the best minds in and out of the industry, who represent Government, industry and academia.
My presentation today will focus on the performance of the local economy in the context of global challenges in the energy industry and Government‟s response to these headwinds along with the fiscal measures that have led tothe resurgence in exploration over the last three years.
When last we met we were faced with less headwinds and challenges in the international energy markets. These new developments have a direct impact on the Economy of Trinidad and Tobago.
On the international front, the International Monetary Fund (IMF) recently forecasted global growth for 2015, in the vicinity of 3.8 percent. This forecast is driven by anticipated growth among emerging market economies; and mixed results among developed economies. However the situation is very dynamic and I think the sentiment was best captured by the statement made at the recently concluded Davos meeting that 2015 will be a „sink or swim‟ year. Nothing underlines this more than yesterday‟s Greek election.
Recent reports indicate that the United States, the world‟s largest economy expanded at an annualized rate of 3.9 percent during the third quarter of 2014. Buoyed by increased consumer and industry spending, this outcome marked the continued recovery of the US economy and contributed to the strongest 6-month growth recorded in the last decade.
Similarly, during the third quarter of 2014, the UK economy grew by 0.7 percent (annualized to 2.8 percent), whilst the Euro-area marginally expanded by 0.2 percent. However, Japan, the world‟s third largest economy contracted at an annualized rate of 1.6 percent – its second straight quarterly decline.
For the more notable emerging economies, among the BRICs nations, India experienced an annualized expansion of 5.3 percent during the third quarter of 2014, whilst the Brazilian economy grew at an annualized rate of 0.3 percent. The world‟s second largest economy, China, also grew during the same period – registering a growth rate of 7.3 percent. It is noteworthy that recent estimates have indicated that China is now saving $200 billion a year as a result of lower oil prices and this may give further boost to that economy.
In general, though ,the outlook for the global economy is being challenged by downside risks arising from the disappointing economic results in the European Union, with only marginal growth at best amidst fears of deflation; the continued slowdown in China from the double digit growth rates achieved in the recent past; a Japanese economy in recession; geo-political tensions in eastern Europe and the Middle East; and the ongoing threat of a further global spread of Ebola, and of course the recent turbulence in the price of oil.
Regarding this latter matter of the price of oil, it is clear that there has been a structural shift as a result of new technology. The challenges posed by geopolitics have always been there and will continue. It appears though, that prices may have overshot their equilibrium position and will show some gradual increases in coming months, particularly given the fact that current prices are insufficient to boost future investment in the industry. The timing of price recovery however, remains uncertain.
Looking at the Caribbean region, it must be noted that Trinidad and Tobago‟s trading relationship with the rest of the Caribbean is an important contributor to the success of our manufacturing and financial sectors. As such, these sectors are exposed to the risk of negative shifts in market demand arising from declines in the economic performance of our Caribbean neighbors. Should the local economy slow next year as a result of the fall in energy prices and lower government revenues, this could present challenges for our manufacturing sector and our budget measures for next year will have to pay close attention to the factors that would help our manufacturers to become more globally competitive.
According to IMF estimates, tourism dependent economies in the region were expected to expand overall by 1.1 percent in 2014 and 1.7 percent in 2015. These expansions are slightly larger than their 0.9 percent expansion recorded in 2013, but still fall below expectations given the increased visitor arrivals from the United States and the United Kingdom whose economies continue to improve. Ongoing challenges to future growth are primarily in the areas of poor international competitiveness and weakening fiscal positions.
The region‟s commodity export-based economies are expected to perform more strongly than their tourism based counterparts. GDP growth in 2014 was estimated to average 2.7 percent and was originally expected to strengthen to 3.0 percent in 2015. Lower commodity prices and difficulties in achieving sustained growth in non-commodity sectors will impact our original projections for 2015.
Our overall projection for the region next year will be for a lower level of growth and continuing fiscal challenges especially for the tourism dependent countries.
On the domestic front, last year Trinidad and Tobago‟s real GDP continued its recovery path, with the Central Statistical Office in September 2014 projecting an estimated growth rate of 1.9 percent in 2014. By December 2014 however, the Central Bank of Trinidad and Tobago estimated real growth for calendar 2014 at 0.5 percent, due to a weaker than expected performance in the energy sector
In recent years the non-energy sector has exhibited vibrant growth, the Central Statistical Office estimated real economic growth of 2.5 percent for the sector in 2014. The Central Bank has also estimated that non-energy growth in 2014 would have strengthened to 3.0 percent.
In contrast to the non-energy sector, growth in our energy sector has under-performed in recent years. Notably, this sector typically accounts for over 80 percent of domestic exports, almost half of government earnings, and approximately 40 percent of national income.
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