Dr Vaalmikki Arjoon
By Sue-Ann Wayow
SMALL businesses will continue to feel the economic brunt of Covid-19 while larger companies have a better chance of survival post Covid-19, poverty levels will continue to widen and regionally, any progress made to lessen poverty could be set back by at least nine years.
This is according to economist Dr Vaalmikki Arjoon who said while the Latin American/Caribbean region has had success in the reduction of poverty before the pandemic, poverty levels were still distressing despite earning considerable revenues from hydrocarbons.
Additionally, Trinidad and Tobago still has high levels in income inequality and according to the World Inequality Database, the top 1% or the richest income earners would have earned 20.2% of the total national pre-tax income in 2019. In 2010 and 2005 they earned 20.7% and 21.4% respectively Arjoon stated
He said, “This staggering gap between the income earnings among the high and low-income earners worsened due to the Covid fallout and will likely persist for the next few years, especially given the closure of many SMEs (small and medium-sized enterprises) and the resultant hammering to employment levels. Consumers are spending less, due to heightened uncertainty about the future of the economy – with fragile sales revenues and cash flow problems, many SMEs have shut their doors, while the large companies are in a better position financially to survive the pandemic.”
SMEs employ over 60% of workers in the private sector and with mass closures and large companies left standing, there will be further inequalities and worsened competitiveness in the economy Arjoon stated.
He said a recent Inter-American Development Bank (IADB) survey found that 67% of low-income households were affected by job losses. Many who did not lose their jobs faced pay cuts. Many of those who lost their livelihoods were low-skilled workers, who did not have much savings and would have exhausted them in the last few months to meet living costs.
Some of those workers faced the risk of extreme income insecurity as they may be paid lower than minimum wage and receive no access to safety nets such as a severance, pension schemes and union representation. Some may also turn to the criminal activities to earn a living if they cannot find legitimate jobs, he added.
What is needed for the survival of SMEs is financial aid.
“Right now, there is over $14 billion in excess reserves sitting idly in the banking system. These are monies that could be put to more productive use by SMEs to resuscitate the sector. However, many SMEs cannot access these funds, as they may be deemed risky and do not meet the criteria to borrow by not having satisfactory collateral, unfavourable credit history, cannot satisfy all documentary compliance and were not very profitable for some time, which is the case for many as we were in a recession before Covid,” Arjoon said.
And misallocation of state funds must be avoided in future and the quality of state institutions needed to be improved in going forward Arjoon said.