The fall in oil and gas prices has been longer and more pronounced than what nearly all experts anticipated when the decline started in mid-2014. This has had significant impacts on all hydrocarbons-rich countries around the world, and Trinidad and Tobago is no exception. Having over a century of experience in producing oil, however, T&T has ridden out and recovered from the ups and downs of this industry, coming out stronger each time.
In late 2015 T&T’s new government inherited an economy sliding into recession as a result of slumping energy prices. In response, Prime Minister Keith Rowley’s administration has shown signs of moving towards a policy of fiscal discipline.
But despite these challenges, after surveying business leaders across all sectors of the Trinbagonian economy, Oxford Business Group (OBG) found indications that many companies are taking advantage of the recession to assess their operations and prepare for future growth. By the same token, it is imperative to use this period as a catalyst for true diversification so that future periods of low energy prices will not have as significant an impact on the local economy.
With the economy in recession it was not unexpected to find that almost half of all business leaders surveyed expected negative business conditions over the next 12 months.But despite the less-than-rosy sentiment, OBG found that an impressive 44% of companies are either likely or very likely to make a significant capital investment in the next 12 months, indicating preparations for future growth and a far more positive medium-term outlook. Companies are also likely taking advantage of the lower-cost operating environment and excess capacity in the market in order to better position themselves for the recovery.
Part of the explanation may lie in the impact of government spending on driving growth in the economy. Challenging common belief, 44% of respondents said that less than 20% of business in their respective sectors is dependent on government-driven activity.
As in other countries around the world, private sector-led growth is more sustainable and creates a more robust and resilient economy. As T&T continues to diversify away from oil and gas, more small businesses and associated employment opportunities will be created.
That being said, business leaders indicated that there are some skills shortages that will need to be addressed to help drive the economy forward and move towards a more knowledge-based economy. Leadership and customer service skills are in high demand and are currently lacking in the local market. Although government spending has been focused on education, more needs to be done to foster these skill sets so graduates meet the needs of the market.
Additionally, T&T remains an attractive investment destination for a multitude of reasons, not least for its tax environment, which 64% of respondents characterised as either competitive or very competitive. Added to the low cost of utilities, well-developed human capital, excellent geographical location and access to markets, it makes sense that companies are making capital investments despite short-term difficulties.
In today’s globalised economy, no country is an island – not even island nations! Of the CEOs we surveyed, beyond the movement in commodity prices, hikes in US interest rates and the Caribbean public debt crisis are the two external events most likely to impact the Trinbagonian economy in the short to medium term. While the market has yet to see dramatic changes in either of these areas, it is worth being aware how activity beyond T&T’s borders can impact both domestic policy and business sentiment.
As OBG continues to monitor these and other issues in T&T, it will be interesting to see how the local business community reacts over the coming months to changes in foreign and domestic markets alike.
OBG Business Barometer: T&T CEO Survey Copyright (c). All rights reserved.
This survey has been designed to assess business sentiment amongst business leaders (Chief Executives of equivalent) and their outlook for the next 12 months. Unlike many surveys, the OBG Business Barometer: T&T CEO Survey is conducted by OBG staff on a face-to-face basis, across the full range of industries, company sizes and functional specialties. The results are anonymous.
The data generated allows for analysis of sentiment within an individual country, as well as regionally and globally. Additionally, comparisons can be drawn between both individual countries and regionally. The results are presented statistically within infographics and discussed in articles written by OBG Managing Editors.
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