(Oxford Business Group, 25.May.2019) — On April 19 the World Bank revised its forecast from earlier in the month, which had predicted that T&T would slip into a recession.
In a press release, the international lender said the twin-island nation was expected to post real growth of 0.9 percent this year, rather than the 0.5 percent contraction projected in its April 9 overview. The bank also upgraded its assessment of the economy in 2018, recording growth of 0.7 percent, rather than a decline of 1 percent.
“This revision takes into account recently released data of quarterly sectoral GDP, non-energy production in the last quarter of 2018 indicating a faster pace of economic activity than previously estimated, and updated figures for 2018 annual oil and gas production,” the statement said.
The revision came after the government pointed out that the World Bank’s figures were based on informal data sources, such as newspaper reports, and that recently released statistics from state agencies showed a stronger performance than what had been initially reported by the bank.
According to Colm Imbert, the minister of finance, the Central Statistical Office plans to publish the official 2018 GDP figure before June, and he believes that the full-year data could be higher than the World Bank’s revised estimate.
Even without a significant change in the official 2018 figure, the latest World Bank data represented a notable shift. “This is a [1.7-percentage-point] correction,” Imbert told reporters. “That’s significant.”
IMF sees expansion from 2020 onwards
April also saw the IMF publish a new edition of its World Economic Outlook database and accompanying report.
The organisation said T&T’s economic performance would be flat this year, down from the 0.3 percent GDP expansion seen last year. While these figures differ from those of the World Bank, the IMF also indicated that its estimates could be amended in light of newly released data. Related: Is This The Most Underrated Upstream Player In The Industry?
While predicting no positive advance in GDP this year, the IMF forecasts the economy will begin accelerating in 2020. The database shows economic expansion of 1.5 percent that year, 2.3 percent in 2021, 2 percent in 2022, and 1.6-1.7 percent in both 2023 and 2024.
More or less flat growth this year is joined by a relatively modest forecast rise in inflation: consumer prices are expected to increase by 1.1 percent. Inflation will, however, heat up over the coming years, as the economy gains momentum and demand increases across the board. The IMF sees the consumer price index doubling to 2.2 percent in 2020 and rising to 3 percent in 2024.
Economic benefits of higher levels of gas production
One reason for the positive outlook is a ramping up of gas production – an economic mainstay.
Output has been rising steadily since 2017, when production averaged 3.3bn standard cu feet per day (scfd), and last year recorded an average of 3.6bn scfd. Take from the country’s gas fields increased further in the opening months of this year, reaching 3.64bn scfd in January and 3.96bn scfd in February, according to data from the Ministry of Energy and Energy Industries issued in mid-April.
Although the US Energy Information Administration expects Henry Hub natural gas spot prices to average $2.79 per million British thermal units this year, down $0.36 on 2018, greater gas output is strengthening T&T’s revenue prospects, which could lead to another update of the economy’s outlook later this year.
Energy talks with Venezuela stall
Despite the upward revisions, there are headwinds to T&T’s growth – principally the political and economic turmoil in neighbouring Venezuela.
In addition to the pressure from hosting more than 40,000 Venezuelans who have fled their country, T&T is concerned about delays to economically significant joint energy projects.
Notably, the Dragon project, which planned to begin piping 150m scfd of gas from Venezuela’s offshore Dragon field to a platform in T&T waters sometime this year, has come to a standstill. The project was intended to offer a secure gas supply at a competitive price, ensuring stability in case of fluctuations in domestic production.
On April 16 Franklin Khan, the minister of energy and energy industries, told Parliament that while an agreement for the Dragon project was signed in August last year, no further steps had been taken.
The uncertainty of the political situation in Venezuela is also impacting long-running talks on the joint development of an offshore gas field. The Loran-Manatee field holds approximately 10trn cu feet of gas and has multinational Chevron as its leaseholder; however, final production-sharing agreements have yet to be concluded.