Trinidad and Tobago: Transitioning from an oil-based economy

Trinidad and Tobago: Transitioning from an oil-based economy

Is Trinidad's new budget viable?

PORT-OF-SPAIN, Trinidad and Tobago, Oct. 18, 2015 – The government of Trinidad and Tobago is preparing to present a new budget. To be presented by the People’s National Movement (PNM), which took over government in September, the budget will be building on a firm foundation even though it lacks the energy resources to fund many programs.

The 2014 Trinidad and Tobago budget was fundamentally sound, attempting to protect both economic and social safety nets in the community while planning for stable transitions for the economy for the upcoming economic and fiscal cycles. The budget included $60 billion in total revenue. The education sector has been a significant expenditure, consuming some $10 billion in FY2014.

The budget is not solely about austerity. It includes increases to social stability mechanisms like the $300 increase in the disability grant public assistance grants and a $500 increase in the baby care grant and senior pensions.

The budget contains surplus oil revenues and structured redevelopment strategy that incorporates the finance sector, labor sector and education. Surplus represents less than a third of the total budget deficit, maintaining the public debt threshold below the 50 percent level. Conversely, there is a clear objective on the part of government to expand and widen capacity utilization in the energy sector.

The entire budget proposal should be finalized before the Oct. 30 deadline.

Critics charge that the new budget is not viable, thanks largely to lower petroleum revenue. While petroleum prices are lower, and the stock prices of oil companies reflect those prices, increased demand offsets losses caused by lower prices.

Moreover, Trinidad and Tobago are moving to restructure the economy away from dependence on petroleum. Transitions are never easy. However, they are manageable and at times necessary.

National Petroleum (NP)  has holdings in digital communication, finance, real estate development, advertising and supply chain distribution. The key is to capitalize those elements into the national brand.

Demand for energy increases as population, technology and development increase. Demand is positively tied to incomes and less affected by price. A notable factor in demand is the prevailing economic structure. Adjusting the scope of the existing energy sector infrastructure to address other burdens of the economy expands development opportunities to newer segments in the growing economy.

Industrial partnerships, structural design and innovative technologies that meet the need of the oil and gas industry should expect to hold more industries favorably aligned toward meeting the financial goals of the national economy. Managing a concerted effort to profit from new segments is the lasting goal of the industrialized oil and gas sector.

Consolidating the hegemony of local enterprises and business segments associated with the petroleum industry either takes economic primacy or becomes a competing force for profitability within market segments of the larger, national economy. Those elements that cease to profit become static losses in terms of operational hours and economic net worth. This contributes to capital losses throughout the wider global economy creating a need for foreign aid.

Such losses need not be incurred in the transitory phase of developing industrial integration. Synchronizing efforts means bringing additional revenues, greater service offerings and more product innovations to bear, as the best strategy for excellence is a reputation for reliability

In the series of changes that take place during a transitionary phase in government, costing and other valuations keep sustained industry growth moving along a positive trend. This is important for reducing economic shocks over time.

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