Published: Wednesday November 5, 2008
Scared and out of money.
This was how experts described American consumers last week as they stopped buying everything from cars to corn flakes and cut back spending by the biggest amount in 28 years.
It was the strongest signal that the US economy had hurtled into recession as GDP-which measures the value of goods and services produced-contracted as consumers turned back their spending by 3.1 per cent.
The operative definition of a recession is two straight months of contracting GDP.
If that applies, then the United States is already there.
And as a collapse in the US housing market, nationwide retrenchment and locked-up lending have produced the worst financial crisis in the United States in more than 70 years, there are concerns that Trinidad and Tobago-already interlocked with the US economy-is on the edge of a brewing financial storm.
In an exclusive interview with the Business Express, Minister in the Ministry of Finance Mariano Browne underscored the possibility of the economic decline continuing in the United States.
"There is the likelihood it will decline. The last quarter has been short," he said. "But things go up and down and (the US economy) can rebound."
He was speaking to the Business Express last Friday following a breakfast discussion on the global financial crisis at the Chamber of Commerce building at Westmoorings.
He did not dismiss the potential effects of a worldwide financial meltdown on an island economy like Trinidad and Tobago's.
"There is a need for concern. There is always a need for concern," Browne said. "But we can't panic. There are always going to be ups and downs. We will deal with this."
Government is confident the country is well prepared to combat the raging economic crisis impacting most of the developed world these days.
"From an investment point of view, we are starting off this round from a strong position. We have a strong surplus balance," Browne told the Business Express.
There are also opportunities to capitalise on the economic turmoil affecting money markets in the United States, Europe and Asia.
"We have strong Heritage and Stabilisation Fund and as prices depreciate, we can get value for money," he said, adding that there were also opportunities for businesses to expand.
His argument was that Trinidad and Tobago exporters came into their own in the post-depression era of the 1980s when the country struggled through its own recession after oil dollars dried up.
Browne maintained that Trinidadians possessed a strong work ethic that was a distinct advantage at a time when the rest of the developed world was struggling against inflationary pressures and a rising cost of living.
He pointed out that while Trinidad was not as recognised for its tourism product, Tobago thrived on the industry and there was the need to implement that positive work ethic to enhance the tourism offering a greater part of the all-round Trinidad and Tobago economic package.
Other Caribbean territories, who have started bracing for the fallout.
Protecting jobs and shielding the poor are aspects of a plan by Barbados prime minister David Thompson to weather the effects of the global financial crisis on the island.
He told an economic consultation last week that his administration was prepared to take pre-emptive action to mitigate against any secondary economic and financial fallout.
Other financial experts believe that Government will have to keep close tabs on Trinidad and Tobago's economic health in the coming weeks and months because of the recession in the US.
Ian Collier, president of the Trinidad and Tobago Chamber of Commerce, says of the recession: "I think they are going to have to monitor the situation and respond to it. It is very fluid at the moment."
He said in an interview at the Chamber's office last Friday that the US elections would also play a role in determining how the world's largest economy dealt with the financial crisis.
Government will also have to continue to be very aware of the ongoing economic developments and "monitor the situation 24/7", Collier said.
Economist Indera Sagewan-Alli noted last week that the US was showing the signs of serious decline.
Speaking to the Business Express last Friday, she pointed to the links between the US market and local manufacturing and exporting.
With demand shrinking in the US, and particularly with the possibility that West Indians who purchase products from the Caribbean losing their jobs, there could be economic fallout in the region.
Sagewan-Alli also suggested that as the result of the US election would have an impact on the economy in the United States.
"We will see a strong effort to revitalise the US economy. But we will have to wait and see," she said.
Source: Trinidad Express Newspapers