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  • 8 months ago
We are joined virtually by Professor of economics at the University of the West Indies, Roger Hosein.
Transcript
00:00You're watching the TV6 News. Let's shift gears to the state of the economy.
00:05We are joined virtually by Professor of Economics at the University of the West Indies, Roger Hussain.
00:12Good evening to you, Professor. Thank you so much for joining us.
00:15Yes, good evening. Thank you for the invitation.
00:17Now, Professor, just yesterday we received, we're just going to dive straight into it.
00:22Just yesterday we received some figures from Prime Minister Kamala Persaud-Bissassar.
00:26Now, she said the deficit at the end of April was $2.7 billion.
00:31For me, it's expected to be $3.9 billion plus $500 million in unpaid checks carried over into me.
00:40Now, the Prime Minister anticipates a year-end deficit of $11 billion.
00:45Let me just ask you off the bat, is this a fair estimate?
00:49What exactly does that mean?
00:52And essentially, what is the state of our economy?
00:56So, the specific numbers as to what would be the overall fiscal deficit for fiscal year 2024 to 2025
01:07was stated in the, what is pitched to be much lower.
01:13But I suspect there was heavier spending as it was an election year.
01:17And by extension, given the depressed state of production of gas and by extension revenues,
01:27because prices are not buoyant, that the overall fiscal deficit would be much higher than was budgeted.
01:35Whether or not it would be $11 billion, I cannot say.
01:38I would have to trust the Prime Minister's number.
01:40That's a phenomenal number, a very high number.
01:42But I am not surprised.
01:43This economy is in a terrible position.
01:45So, I am not surprised when I hear numbers like that.
01:49I keep abreast of these things.
01:51And whilst I may not be able to specifically say it's $11 billion or $10.9 billion or $11.1 billion,
01:58I'm reasonably comfortable with $11 billion because of what I know about the economy.
02:04And if you allow me to elaborate, I would say that one of the things that I want the population to note
02:12is that the IMF has consistently lowered the growth forecast in 2023, 2024, 2022, 2023, and 2024
02:25for the Trinidad and Tobago economy.
02:27And before, when I raised those numbers in the public domain, people, without even reading the three online databases from the IMF,
02:35would comment and say it's not correct.
02:37And it's clear that they didn't understand the numbers.
02:39But the numbers are there for the world to see.
02:42And our growth level, using the growth rate, when you convert them into index numbers, has been lowered.
02:48So we are in a much worse position today, OVC, in using the IMF 2024 numbers and the IMF April edition
02:57of the World Economic Outlook Database 2025 numbers than was said in 2022.
03:03And it's going to be a challenge to meet plenty of the budgetary, of the promises that we have laid out in various places.
03:13But it is what it is.
03:14And we have to work in the best way we can to get things done.
03:17Now, of course, Professor, you shared with us this visual of the overall fiscal balance as a percentage of GDP.
03:25Can you share your interpretation of this data?
03:29And my question is, can we afford particularly the 10% salary increase as promised on the campaign trail?
03:38So, can you pull up the graph?
03:41I'm not seeing it.
03:44You may not.
03:44Okay, I'm not seeing it.
03:45You may not be able to reference it.
03:47Hold on.
03:48So you are looking at which one of the graphs?
03:50The graph on GDP growth rate?
03:52Overall fiscal balance as a percentage of GDP.
03:56Right.
03:57So as you can see, the overall fiscal balance as a percent of GDP is negative.
04:00And it's going to be very difficult in the economic climate that we are in to meet some of these promises, which will increase fiscal expenditure.
04:12The prime minister said that she will find a way to pay the various salary increase, and we have to trust that the prime minister knows what she is saying.
04:22But for where I sit and the numbers that I know, it's going to be very difficult.
04:27And I urge all to not allow the expectations to get carried away, simply because in this type of setting that we are in here, with these persistent fiscal deficits in the context of low growth and an overall non-energy fiscal balance for 2024, 2025, that may go to about minus 26 to 27 billion.
04:54And that great caution and great care is required, so that even if this money is going to be paid, it may not be all paid in cash, is my suspicion.
05:05And it is going to require a period of patience for about three years and working together so that promises could be met, so that people are not disappointed, and we do not excessively, beyond reason, deteriorate the fiscal balance.
05:20Our economy is in a fragile position.
05:23Now, you, of course, call it fragile.
05:27Renessa, of course, spoke with Dr. Atts for one of our stories this evening, and she was questioned as to whether the country is bankrupt.
05:36Dr. Atts said no.
05:37Do you agree that we are not bankrupt?
05:40Well, it depends on your measurement.
05:42So, if you look at the stock of reserves, some people would say we have $6 billion in reserves, and yes, that's correct.
05:49One of the things I want people to note is, whilst the former Minister of Finance would talk always and consistently about the stock of reserves being close to $6 billion,
06:00and import cover being at all about $7 billion, he rarely ever mentioned that the external debt continuously increased from 2015 to 2025 to the extent now that the difference between reserves and external debt is about minus $273 million.
06:18And our non-energy fiscal balance, which should be close to zero in my understanding of the way long-term planning should operate, is about minus $26 billion for this fiscal year.
06:42So, it's going to be a tough battle.
06:45So, people can say we are not bankrupt by using whatever definition they want, and I respect that.
06:51I am saying that when you look at the specific indicator variable, reserves less external debt, that we are in a much more troubling position than when you look at reserves alone.
07:04So, just to break that down, Professor, external debt means what we owe, and reserves would mean what we have.
07:12So, obviously, if what we owe is more than what we have, then we are obviously in debt.
07:18In a strained position.
07:20Now, what people would say is that all the debt is not due one time.
07:24That's fine.
07:24I take that argument.
07:25I am saying if we were to take a simple metric and use the stock of reserves, less external debt, as a sort of guiding principle and position as to where the Trantobago economy is at.
07:36You would see we move from about $9 billion U.S. reserves minus debt in about 2011-2012 to minus $273 million as we speak.
07:47And that's not even the most up-to-date number.
07:49When we get numbers from May 2025, I suspect that would be our minus $400 million U.S.
07:56So, as grim as a picture as that may be, the Prime Minister promised to fulfill her promises.
08:04She said that we will plug that hole, to quote her correctly.
08:08She had several proposals, Professor, to fix that situation.
08:12One was to draw down $2.7 billion from the overdraft, refinance 60% of Treasury bills for May.
08:19That is to the tune of, if I'm correct, $647.7 million.
08:24And also to look at the HSF to see what can be drawn and to borrow, I believe the figure was in TT, $100 million.
08:33Are these feasible plans or is it just simply a temporary measure?
08:40Will this go to just pay bills or can this also help fulfill some of those promises?
08:49No, well, some of this, that's a lot of money you mentioned there.
08:53You mentioned $2.7 billion, then $600 million, then take some money out of the HSF and then borrow a further $1 billion.
09:00So, it sums up quite a bit and it could be used to fulfill some of the campaign promises.
09:05And the Prime Minister is perhaps showing that she's a woman of her word.
09:10And if she says something, she's going to stick to it.
09:12And therefore, that she has substance and continuity and we have to respect that.
09:17What I'm saying is that it also is necessary that whatever borrowing and drawdowns we make don't only contribute to recurrent type of expenditures,
09:29but contribute to capital injections in the economy and injection to the economy that widen fiscal space
09:37and that enable a greater density of economic activity and create a better enabling environment is those are the type of injections alongside honoring the promises that we made in terms of wages and whatnot
09:52that would bail this economy out in the medium term.
09:55So, we have an instantaneous problem and the politicians would address that as best as they see.
10:01My concern is the medium term outlook and shifting the production possibility frontier and the aggregate supply curve rightwards,
10:09which in turn means we have to put more capital into the economy to create more productive space.
10:16And that's what people like myself are going to be closely monitoring in the coming months to see how we crowding more economic activity to increase in public expenditure on the investment side
10:30that in turn could encourage a greater amount of private sector investment, both domestic and foreign.
10:37Foreign investment as well.
10:38You did speak to the state of foreign reserves and external debt.
10:43Let's move to the state of labor force, the labor force participation rate.
10:47Your thoughts?
10:49That's in a terrible state, you know.
10:51I mean, people don't really talk about it, but it has collapsed from about 63% in 2004 to about 61% in 2015.
11:02And if you work out the numbers for 2024, you would get about 54.8%.
11:10Now, if only 54.8% of your non-institutionalized population go on to take part in the labor force
11:18and you have a significant number of people forming the group economically inactive, that's a worrying sign.
11:28And therefore, the new minister of labor has a lot of work to do to improve that labor force participation rate.
11:36One of the first things I recommend is that he undertake an urgent study to understand why the labor force participation rate has decreased so rapidly
11:46and how that interacts in terms with the fall in the overall level of economic activity and the rise in criminal behavior in Toronto and Tobago.
11:57And when he understands the dynamics involved via intense study, associated policy recommendations could come forward as to how to reverse the labor force participation rate.
12:09But at about 55%, that's rather low. It's one of the lowest in the Caribbean.
12:13I think only Haiti in the English-speaking, in the Caribbean, is lower than Trinidad and Tobago using 2024 data.
12:22Now, Professor, that is very interesting, very telling data that you're bringing to us.
12:28But, you know, you did say that the labor minister should embark on a study.
12:32But how long are we going to wait for this study to be conducted, to be completed, to get a report, then to act?
12:37Is there anything immediate that can be done right now?
12:40You know, that's a really good question.
12:43And one of the frustrating things about this economy, we have been begging for a detailed understanding of the labor market
12:51and the state of the economy that shows, reflects what the IMF is saying.
12:57And it has just been ignored and swept under the carpet.
13:00And when you speak the truth, people come out and talk a certain nonsense and attack you.
13:04And, you know, it's kept being pushed down the road, pushed down the road, pushed down the road.
13:09But without understanding, in a rigorous, economic, scientific way,
13:14the state of the economy, you are going to be guessing.
13:17You are going to be hitting in the dark, and then you increase the probability that you could do something wrong.
13:24Now, I agree with what you say and that we need to change the wheels on the bus as we move, and that's fine with me.
13:30So, one of the things that we have to do, apart from fulfilling the politicians meeting their various election promises,
13:38is we have to lower crime.
13:39Now, once Roger Alexander and the various people involved in crime fighting hereafter do that job of lowering crime,
13:47people would be less afraid to go to work.
13:50Business people would be more willing to inject capital into the economy and, therefore, create more scope for employment.
13:56And you create a type of dynamic by lowering crime that gives the economy some breathing space and some life and the capacity to grow.
14:05And that's an excellent place to start as we start to revitalize the economy and boost the chances of the labor market situation improving.
14:15Right. So, is that where you are suggesting, and you have been advocating, Professor,
14:21that once we, you know, take care of the homicide rate, that will have an effect on the economy?
14:26Well, of course, I mean, how can you have three back-to-back years of homicides level that are the three highest in history?
14:35How is that reasonable?
14:37And so, we need to take dramatic action to, if we use the homicide level as an indicator of the state of crime in the China and Tobago economy,
14:48we need to take dramatic action, probably reinstate the state of emergency and a limited curfew in some areas.
14:55The policy experts in this area, in the area of crime, would know what to say and what to do.
15:00But we put in place policy measures and we suppress crime instantaneously.
15:04We bring it under control.
15:06We send a strong message to these criminals that we will come after you.
15:10And at the same point in time, because it's so many moving parts requires to fix this economy,
15:15given the terrible state it is in, at the same point in time,
15:18we put measures in place for long-term transformation by working at the secondary school and the primary school
15:25so that the young boy today, who is 10 years, for example, who in 15 years may hold a gun in five years' time,
15:33we work with that young boy and that young girl so that the probability that in five years' time they would hold a gun
15:40reduces to a very low number.
15:41So it's many moving parts that have to take place at once.
15:46But my suggestion is if we could put some solid measures in place to immediately send some strong signals
15:53to the criminal classes that we are becoming totally intolerant,
15:59we give the present possibility of investments a chance to increase
16:04and the economy a chance to breathe and slowly come out of this slumber and state of fright that we are in
16:10so that growth could take place.
16:12Now, Professor, let me just revert to labor force participation.
16:16Well, we would assume that those involved in crime, as you mentioned,
16:20would not be participating members of the labor force, one.
16:25But also, maybe those Petrotrin workers, maybe those workers who would have been involved in the refining of oil and so on,
16:32do you have any insight into the cost of restarting the refinery?
16:37And if you can share some complexities that must be worked on to get the refinery back up.
16:44Now, just based on the rhetoric that we've been hearing,
16:47I get the impression that the KPB, the Kamala-Pasad Business Administration,
16:51is not looking for an external investor.
16:54The rhetoric seems to indicate that it's a government initiative.
17:00Well, you know, there are many other people much more qualified than me
17:04to talk about the technical details as regards opening the refinery.
17:10What I would say is as a citizen and as a member of the fence line of the refinery,
17:15I would be very thankful for the refinery to be opened.
17:20I hope it is opened in a manner and form that does not use state resources,
17:24but uses private sector resources.
17:27And if it is open using private sector resources,
17:29I totally and wholeheartedly support it.
17:33I think the fence line will be joyful for the refinery to be opened
17:36because the economic activity in the fence line has fallen by as much as 35% in some places and even more.
17:43So that policymakers and the technocrats involved would need to do their relevant homework
17:52and find out who is the best partner and what is the startup cost
17:55and do it in a very sequenced way that does not put strain on the state
17:59because with a non-energy fiscal deficit for 2024-2025 that may drift close to $26-27 billion,
18:08you don't have much wiggle room, you don't have space to increase that any further
18:14and therefore you need the private sector and various places,
18:18local firms who may have bidded on the refinery in the past
18:22to come forward now and produce their private sector capital if they want to get it done.
18:28But in my opinion, it should require as little fiscal injections as possible.
18:34Meaning as least state investment as necessary?
18:39Yes.
18:40So as we close, Professor, do you have a wish list?
18:43I mean, let's just say ministers, the Prime Minister is tuning in to TV6
18:48and they are listening to you.
18:50Do you have a wish list?
18:53I would say to her, Madam Prime Minister, congratulations on your victory.
18:59You come with a breath of fresh air in the sense that the economy was in such a doorman state
19:05that you give people a sense of hope now because you have brought fresh new people
19:10who hopefully will change the growth trajectory of the economy.
19:13I would say in the first 100 days, I want to see an institute of remittances
19:20that can help grow remittances.
19:22I want to see a specific person assigned to growing tourism numbers.
19:27So just as we have three ministers in the Ministry of Housing,
19:30if we can get three ministers in the Ministry of Finance
19:33or the Ministry of Trade so we could focus on diversification
19:37by focusing on merchandise trade, focusing on tourism,
19:42focusing on remittances and get those cracking alongside
19:45increasing foreign direct investment inflows
19:48and reforming the e-tech park system so that it only houses firms
19:53that generate foreign exchange or firms that import, substitute
19:57and save on the use of foreign exchange.
20:00So within 100 days, we have started the process to increase non-energy export revenues,
20:09reduce our imports, increase import substitution,
20:15increase the probability of a greater amount of remittance inflows,
20:18increase the probability of a greater arrival of cruise ships
20:21and overnight tourists, reduce the probability of crime
20:25and give the economy a greater probability of immediate growth
20:29and medium-term growth.
20:31I think if that were my wish list, I would send it to Santa
20:33or the Tooth Fairy or whoever else, and I hope that it comes true.
20:38Of course, Professor Roger Hussain, of course, you're attached
20:40to the University of the West Indies, you're a lecturer there.
20:43Let me thank you so much for joining us this evening
20:45and, of course, sharing your take and your insight.
20:47Thank you very much. Have a good evening.
20:50All the best to you.
20:53One of the attendants...
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