The Socio- Economic Impact of the Global Pandemic is Real

The COVID-19 pandemic is so much more than a health crisis. Alongside the cost of lives lost, globally, it has triggered one of the worst job losses since the Great Depression.

The impact is suffocating societies and economies from country to country. While the impact will vary, a real danger is obvious, poverty and inequalities are on the rise. Basic economics explains that labour, a key factor of production and having been quarantined in most sectors in the economy, borders being closed, and global value chains disrupted, a contraction on the level of output is inevitable.

The Ministry of Finance’s Review of the Economy stated that the IMF estimates, “Global growth is projected to contract by 4.9% in 2020, with a gradual recovery of 5.4% in 2021, hinged on declining rates of infection and the development of a vaccine.” While the World Bank suggests, “Global GDP growth of -5.2% in 2020, with output rebounding to 4.2% in 2021.”

Just like most countries, the COVID-19 pandemic impacted the Trinidad and Tobago economy. Coupled with a fall in major energy commodity prices and a steep fall in global demand, our exports for manufactured goods and energy products significantly decreased.

Here at home, policies like social distancing, quarantines, lockdowns (or whatever you would like to call it), temporary closure of some industries, such as shops and malls, bars and restaurants resulted in a slowdown and in some cases, a complete stop in legal production and consumption activities for an uncertain period of time. Consequently, this led to the closure of businesses and hundreds if not thousands of workers (terminations mainly occurred in the arts, entertainment and recreation, tourism, manufacturing, food processing and drinks and construction sectors* ) home with no income. With international borders being closed as well as the early suspension of the cruise season, the first five months of calendar 2020 total visitor arrivals fell by 40.9% as compared the 2019 period.**

According to a UN report, Socio-Economic Response to COVID-19, if the pandemic effects are protracted and countries continue global synchronized economic lockdown continues:
1) The negative effects on price and the demand for energy products (accounts for 80% of Trinidad and Tobago’s merchandise exports) will persist.
2) Domestic economic activity (associated jobs and livelihoods), and fiscal revenue will be impacted adversely.
3) The inadequate fiscal cushion capacity to combat a severe economic shock, along with the economic stimulus to support the socio-economic activity and re-ignite economic activity will increase economic risks. However, given our high debt to GDP ratio.
4) The economic stimulus packages to boost the economy may lead to debt overhangs and possibly create future problems.

The same report projected the following economic losses for Trinidad and Tobago:
1) The level of real economic growth can fluctuate between -4.5% to -6.8% for 2020 while for 2021, real range from 2% to 2.6% depending on economic climate at the end 2020. However, the Review of the Economy reports that in the first quarter of 2020, real GDP fell by 1.9%. But, as more restrictive measures were implemented in March, real GDP fell by 10% in the second quarter.
2) Unemployment is expected to be at 5.04% in 2020 and 5.12% in 2021.
3) The fiscal net lending/borrowing by the government in 2020 will probably range from 10.9 to 16.3% of GDP, while in 2021 will depend upon economic growth financing options taken in 2020. However, at the outset for 2021, it is estimated that net borrowing by the government will range from 7.6% to 9.6% of GDP.
4) The energy exports declined by 56% in Quarter 1 of 2020 and have resulted in losses of US$25 million per month. This corresponds to projected loss of revenue of $9.2 billion in FY 2020.

It’s a new year and the pandemic continues to test the social and economic structures of many countries. Assessing the impacts of the pandemic on societies and the economies is imperative to inform and customize the responses of governments to recover and ensure that we all move forward with this effort.

*Ministry of Finance - Review of the Economy 2020 government of the Republic of Trinidad and Tobago resetting the economy for growth and innovation.
**Ministry of Finance - Review of the Economy 2020 government of the Republic of Trinidad and Tobago resetting the economy for growth and innovation.