Five months into 2017 and already it is looking to be another economic annus horribilis for the Caribbean.
As is being reported out of Georgetown, the slowdown in the economy is forcing companies to contemplate staff attrition. Such are the reports coming out of Berbice, Essequibo, Linden, Georgetown, and other parts of Guyana, even as chairman of the Private Sector Commission, Eddie Boyer, while acknowledging the slowdown, has expressed the hope the economy would “right itself”.
According to the reports, business have been laying off staff, while other companies have been reducing working hours. From the reports, it does not appear the economy will begin to “right itself” soon. With the prospects growing increasingly dim, businesses are beginning to face the harsh reality of talking to staff about layoffs, reduced working hours, pay-cuts, and outright retrenchment.
As reported last month, a Water Street businessman told Kaieteur News he has been considering downsizing a staff of 200 workers since last Christmas. Also, a food importer in Regent Street reported the decision to reduce the number of containers coming to Guyana. Security companies have also been feeling the economic slowdown, and are reporting being forced to reduce salaries, with some workers taking deep pay cuts of close to 50 percent to remain employed.
The outlook is also indicating another horrible year for Barbados as it deals with, among other things, its dwindling foreign reserves. According to one analyst in the Nation newspaper, Central Bank of Barbados online year-over-year data to February 2017 show reserves have declined by 29 percent to (US) $329 million – a total of roughly two months of imports. This is worrisome, as it is the fastest pace of decline since November, 2013; this total is also the lowest level of foreign reserves since January, 2000.
The picture is also a foreboding one for Trinidad and Tobago. Late last month, this nation’s long-term sovereign credit rating was downgraded by the ratings agency Standard and Poor’s. Analysts are saying this downgrade is a signal Finance Minister Colm Imbert has two choices before him. He has to either work even harder to substantially increase Trinidad and Tobago’s revenue, or reduce its expenditure. Or he has to multi-task in order to accomplish both objectives. Either way, Imbert has as many sleepless nights ahead, as do the businessmen anguishing about layoffs in Guyana, and Barbados government officials grappling with the grim reality of declining foreign reserves.
S&P has in as many words told the Trinidad and Tobago government the outlook is not good. In providing its rationale, S&P said the downgrade “reflects further deterioration in Trinidad and Tobago’s debt burden, including a higher-than-expected rise in net general government debt to GDP and the interest burden over 2017-2020”.
Such an assessment is indubitably sobering, since it is indicating Trinidad and Tobago’s debt and interest burdens are rising too quickly. It means the government has not yet achieved the objective of closing the widening gap between earnings and expenditure.
If the S&P downgrade is not enough to awaken Imbert from his infrequent slumber, a yet another recent drawdown from the Heritage and Stabilisation Fund of (US) $251 million caused the international rating agency, Moody’s, to describe the move as a credit negative, saying “it reflects a deteriorating fiscal position driven by large fiscal deficits amid lower energy-related government revenues”.
Now with the S&P downgrade and Moody’s credit negative, it is likely to become more expensive for the government of Trinidad and Tobago to borrow money to finance its deficit. To arrive at such a place puts this country on a path similar to where Barbados is now precariously positioned, where banks would hesitate to finance such a fiscal deficit – either in domestic, or foreign currency.
The signs are clear the Caribbean’s economic landscape will keep deteriorating, and it is imperative these governments prepare for hard times ahead.