Back in the Saddle: CEOs See a Brighter Future for Trinidad and Tobago
02 Nov 2017
A few months ago, we wrote a piece discussing the prospects of the economy of Trinidad & Tobago. The title got it right: forecasts were mixed, and today remain the same.
The twin-island Caribbean country, located just 11 km north of the coast of Venezuela, keeps trying to lift itself up from several years of economic malaise, with growth contracting in 2015, 2016 and 2017.
Promising developments in the energy sector, driven by new projects coming on stream – notably EOG’s Sercan and BP T&T’s Trinidad Onshore Compression and Juniper projects – together with an uptick in exploration activity, may indicate signs of recovery that could spill over into other sectors of the economy. In the second OBG Business Barometer: T&T CEO Survey, 60.7% of companies said they were likely or very likely to make a capital investment, up from 44% in November 2016, while 57.1% were positive about local business conditions, a marked rise on the 18% reported last year.
Business leaders see signs of recovery, room for improvement
Overall, the results showed some optimism, alongside a widespread willingness to invest and work towards economic recovery.
Two answers – from a total of 11 questions – exemplify the sense of faith in T&T’s short to medium- term growth.
First, the grade of competitiveness of the country’s economy on the tax front is widely seen as more than acceptable: 67.8% of respondents considered the tax environment competitive or even very competitive.
On a wider front, the vast majority of CEOs (57.1%) describe local business conditions as positive, compared to 18% in our previous survey from November 2016.
Leadership skills most in need in T&T
However, there are some remaining concerns, and four issues are always of particular importance to the country’s business leaders: security, inefficiencies in the public sector, a lack of competitiveness in the foreign currency market and a poor work ethic in the local labour force. Ask any CEO of a top-tier company in T&T, and they will tell you these are the areas giving them the most headaches.
The subject also arose in our survey, which shows that leadership is the skill in greatest demand in T&T. When asked, 50% of respondents wanted more leadership skills in the country, against 32.1% who considered customer service the most needed talent in the business environment. These numbers almost mirror the results from the 2016 survey – evidence that it is a continuing issue.
The World Economic Forum (WEF) “Global Competitiveness Report 2017-18”, released in late September, also underscored this perception, ranking poor work ethic in the national labour force as the top challenge for those doing business in T&T. Bureaucracy and corruption were the other two most problematic factors, according to the WEF.
A low level of trust in public entities is probably one of the reasons the private sector has committed to lead the economic recovery on its own: 60.7% of companies interviewed in the OBG CEO Survey are likely or very likely to make a capital investment in the next 12 months, up from 44% in the previous survey.
Changes in the US have outsized impact on T&T
A common characteristic in numerous frontier and emerging markets, particularly those in the Caribbean region, is their dependence on external factors – and in the case of T&T, events in the US.
That is why one of our survey questions is particularly important in my view: we asked CEOs to indicate the top external event with the potential to impact T&T’s economy in the short to medium term. Responses from Trinbagonian businesspeople demonstrated the close link between the twin islands and the US.
A combined 71.4% of responses related to factors in the US. Political changes in the US were the first matter of concern (32.14%), followed by resiliency in the US economy (25%). Changes in the benchmark US interest rate were also considered an important external event by 14.3% of respondents. The situation in Venezuela is increasingly a topic of concern, with 10.7% of respondents choosing Venezuela’s recent struggles as the top external event.
International forecasts paint a similar picture
Despite the latest IMF World Economic Outlook, which suggests real GDP growth will decline by 3.7% this year, there are signs that the economy is turning a corner. The same IMF report predicts GDP will grow by 1.9% in 2018, and, while still contracting in 2017, the GDP numbers were better than 2016, which saw a 5.4% contraction.
The more optimistic projections of C-suite executives surveyed by OBG were a testament to the fact that some members of the business community see improvement in the country, with a few predicting growth rates as high as 2-3% for 2017. While these predictions may have missed the mark in 2017, the IMF’s projections for 2018 show that a return to growth is not far off.
Our survey also coincides with the recent publication of the 2017-18 edition of the World Economic Forum’s global competitiveness index, in which, as a result of a technicality, T&T has seen its score rise by 11 points. Out of 137 countries, the twin-island economy placed 83rd, up from 94th out of 138 in 2016. The fall in GDP in 2016 made the forum re-categorise T&T from an “innovation-led economy” to an “economy in transition”, which, paradoxically, ended up helping with the ranking, as the country was graded on the basic pillars of competitiveness instead of innovation.
Private sector demonstrates willingness to tackle structural problems
A major conclusion of the latest OBG CEO Survey is that the private sector looks ready to take the lead in pursuing a much-needed shift in the economic paradigm. Recent initiatives from the public sector, which seek to facilitate manufacturing and exports, should go some way towards helping in this regard. What is most worrying about the islands, however, is that its foremost problems – scarcity of leadership skills, corruption and a lack of security – are structural, and will therefore require increased interaction between public entities and the business sector. The good news, as our barometer indicates, is the will to fix these issues is present in T&T.