PORT OF SPAIN, Trinidad– The Trinidad and Tobago government is anticipating that the gross domestic product (GDP) will grow by two percent this year.
Finance Minister Colm Imbert, delivering the TT$57.6 billion (One TT dollar=US$0.16 cents) budget to Parliament on Monday, said nominal GDP (NGDP) is expected to grow to TT$190.7 billion in 2022, or TT$25.4 billion more than the latest revised GDP figure of $165.3 billion for 2021 using the most recent data published by the Central Statistical Office (CSO), an increase of 15.3 percent in one year.
Imbert told legislators that the GDP in 2022 is also TT$48.5 billion more than the GDP for 2020, an increase of 34 percent in two years.
“It is noteworthy that our conservative Ministry of Finance estimate of GDP for 2021 in our last budget was $151 billion but is now confirmed using the CSO’s recently published data to be TT$165.3 billion.
“The economic performance in 2021 was, therefore, better than we had previously assumed,” he said, noting that the fiscal deficit for 2022 has been reduced to TT$2.43 billion or 1.3 percent of GDP in 2022, down from the initially expected deficit of TT$9.10 billion or 5.8 percent of GDP at the time the 2022 budget was read in October 2021.
The Finance Minister said that expenditure in fiscal 2022 is now estimated at TT$54.07 billion and revenue at TT$51.64 billion, representing an increase of TT$8.31 billion in revenue in 2022 over the original estimates.
“I must stress, however, because it appears that some commentators either do not understand or pretend not to understand that despite our significantly improved revenue in 2022, we will still have a fiscal deficit in 2022 and 2023, and we must still contend with a high level of debt servicing.
“So, there is no great amount of surplus money in 2022 or 2023 to throw around, as some would have us believe. With better revenues, we can better manage our debt financing and overdraft, reduce our fiscal deficit, improve our cash flow and address long outstanding arrears of payments to suppliers of goods and services,” Imbert said.
He told Parliament that by way of example, the government could pay out four billion dollars in value-added tax (VAT” refunds in 2022, “significantly more than initially planned.
“However, it is noteworthy that if we did not have to cater for spending well over a billion dollars in subsidizing fuel in fiscal 2022 or make a deposit into the Heritage and Stabilization Fund of another billion dollars, which is counted as expenditure, revenue and expenditure would have been in balance in 2022.”.
Imbert said that due to global events and the fact that much of the food and manufactured goods are imported, inflation was kept at bay during the pre-coronavirus (COVID-19) years at the superficial level of one percent, has been trending upwards to 4.7 percent in 2022.
“However, this rate is significantly below the rate of inflation of 9.8 percent in emerging and developing countries, the 8.6 percent inflation rate in the Euro area, the 8.3 percent rate in the United States, and the 9.8 percent rate in the United Kingdom.
“And at a sub-regional level, as of June 2022, the economies of South America had an inflation rate of 8.8 percent, inflation in Central America and Mexico was 7.5 percent, and the rest of the English-speaking Caribbean averaged 7.3 percent. Notably, the inflation rate in Barbados in July 2022 was 11.2 percent.”
Imbert said that while the government continues to be engaged in financing essential programs such as road repairs and the purchase of pharmaceuticals through state enterprises, at the level of the Central Government, “we have not needed to engage in new direct borrowing since December 2021.
“This aside, we have more than adequate access, if the need arises, to preferentially priced loans from the Development Bank of Latin America (CAF), the IDB, the CDB (Caribbean Development Bank), the international capital market, and the domestic banking market, among other sources of financing.”
The Finance Minister said that the debt to GDP ratio had been reduced from over 80 percent in
September 2021 to 70 percent in September 2022.
“Based on our current borrowing and repayment schedule, we expect no significant increase in our total government debt in the 12 months between December 2021 and December 2022 or our debt to GDP ratio, the first time this will have occurred in many years.
“To stimulate growth and maintain economic momentum by increasing expenditure on our Public Sector Investment Programme, now at TT$6.2 billion in 2023, which is where it counts, we have set a new soft debt-to-GDP limit of 75 percent for the next two years, which is well below the ratio of most countries in the world.”
Imbert said Trinidad and Tobago’s record as a country that has never defaulted on its public debt remains intact, in contrast to other countries in the region that have found it impossible to honor their debts over the years.
He said the current account of the balance of payments is anticipated to record a surplus of more than four billion dollars in 2022. Net official foreign reserves as of August 2022 stood at U$6.8 billion, representing 8.5 months of import cover, well above the international benchmark of three months.
Imbert said that due government had deposited US$163 million or $1.11 billion into the Heritage and Stabilization Fund (HSF) for intergenerational benefit.
H due to higher-than-expected oil and gas prices said foreign exchange inflows from the oil and gas sector for the first eight months of calendar 2022 were US$1.90 billion, or US$1.33 billion more than the same period in 2021.
Imbert said the government is encouraged by the July 2022 decision of the international credit rating agency, S&P Global Ratings, to revise the country’s outlook from negative to stable and to maintain our credit rating at investment grade BBB-.
“We understand this credit rating reflects the fundamental strength of the country’s economy and its future developments and resiliency from multiple shocks. We recognize that this is the first time over the last 15 years that S&P Global Ratings has taken positive rating action on Trinidad and Tobago.
“In the current situation facing the world economy with multiple economic and financial distress cases, negative outlooks and credit rating downgrades are the norm rather than the exception. As such, we are now in a favorable position.”
Imbert said Trinidad and Tobago remains an attractive location for investors, hence the ready availability of credit from international banks and multilateral institutions.
“As S&P puts it, higher prices for oil, gas, and petrochemicals will spur economic recovery in Trinidad and Tobago and strengthen financial resilience; the recovery is expected to lead to solid government revenue growth and more rapid fiscal consolidation; the outlook on Trinidad and Tobago are revised to stable from negative and its ratings are affirmed, including the BBB- long-term sovereign credit rating on the country.
“The stable outlook reflects their expectations that high prices of key exports will more than offset the impact of lower-than-expected energy production, returning the economy to growth after six years of contraction and helping to stabilize debt-to-GDP metrics.”
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