PORT OF SPAIN, Trinidad, CMC – The Trinidad and Tobago government says economic activity rebounded in 2022 under the influence of favorable terms of trade, with the national economy growing by 1.5 percent.
Finance Minister Colm Imbert, during a four-hour presentation of the nearly TT$60 billion (One TT dollar=US$0.16 cents) national budget to Parliament on Monday, said that the growth last year came after the economy had contracted by one percent the previous year, “which was eight percent better than the situation in 2020” as well as the COVID-19 onset year.
“ Further, growth continued in the first quarter of 2023 at a rate of three percent. Significantly and from a diversification perspective, economic growth was driven by a buoyant non-energy sector, which expanded by 5.8 percent in 2022,” Imbert said.
The Finance Minister said that because of supply chain difficulties, inflation began to increase in 2021 and 2022, reaching over eight percent at the end of December 2022.
“These Inflationary conditions were driven mainly by considerable increases in the cost of imported food, essential items, raw materials, shipping, and energy prices, which have passed through to domestic prices.
“The unusually intensive flooding in 2021 and 2022 also added to inflation. Yet, as 2023 unfolded, our monetary policy, particularly our decisions to maintain and not increase interest rates and to support our exchange rate, created the conditions for a consistent decline in inflation, which fell to four percent in August 2023.”
Imbert told legislators that the fiscal consolidation process has begun to reap dividends after a record deficit of 9.1 percent of gross domestic product (GDP) in the financial year 2020, “we generated a budgetary surplus of 0.6 percent of GDP in 2022, and we are estimating an overall deficit of less than 1.8 percent of GDP in 2023, well within the international benchmark for a fiscal deficit of three percent of GDP”.
Imbert said that the external fiscal buffers remain healthy and strong. In 2022, they amounted to US$16.3 billion, comprising gross official reserves of US$6.8 billion or 8.6 months of import cover, commercial banks’ external reserves of US$4.3 billion, and the Heritage and Stabilization Fund (HCF) with just under US$5.2 billion under management at that time.
|” Our external fiscal buffers thus represented 52 percent of our GDP in 2022 and remain at 53 percent in 2023, an adequate level to meet any emergency event that might arise.
“Additionally, domestic financial conditions remain accommodative despite increasing foreign interest rates. The financial system is sound, with adequate and appropriate capital, liquidity, and profitability levels. Moreover, our sovereign creditworthiness has improved, with sovereign interest rate spreads over US Treasuries much lower than most of our regional peers in Latin America and the Caribbean,” Imbert added.
The Finance Minister said that the government’s focus on medium-term macro-economic adjustment had contained the public debt, which declined from 79.5 percent of GDP in 2021 to 66.6 percent of GDP in 2022 and remained at about that level in the first half of 2023, reaching 70.9 percent at the end of 2023.
“We are therefore confident that we can maintain debt at our soft target level, that is less than 75 percent of GDP in the medium term, well below many of our peers in the region,” Imbert said, adding that “as in the past eight years, we will maintain fiscal discipline in 2024, rebuild fiscal buffers and advance structural reforms to diversify the economy in preparation for the expected global energy transition”.
Imbert said that the Medium-Term Policy Framework has been kept under consistent analysis and review, and it will continue to anchor the government’s planning efforts and reinforce fiscal and debt sustainability.
“Our fiscal policies and measures are thus shielding the budget from energy revenue volatility and providing early warning signals relating to fiscal and debt sustainability. However, we know that we are significantly below the highest production level of 4.2 billion cubic feet per day in natural gas utilized by our petrochemical plants and LNG facility at capacity levels in the past.”
Imbert said that at current production levels, averaging 2.7 billion cubic feet per day. The processing plants have a spare capacity of 1.5 additional billion cubic feet per day, adding, “We have therefore taken decisive action in support of our energy production capacity to increase our oil and gas production.”
He said Rystad Energy, an independent research and business intelligence company, forecasts that if key offshore projects advance, gas production could rebound to four billion cubic feet per day by 2030. In the interim, gas production will stabilize at approximately 2.6 billion cubic feet in 2024 and 2.5 billion cubic feet in 2025.
Imbert said that the energy sector would remain the country’s primary growth engine in the near to medium term, and with the economic recovery taking root in 2022, the growth rate in 2023 is now estimated at 2.7 percent, with broadly similar growth rates in 2024 and 2025.
Imbert said that significant economic growth is now being driven in a much more balanced manner by the energy and non-energy sectors.
He said while the energy sector contracted by 0.3 percent in 2022 and may contract by a further 0.6 percent in 2023, with a rebound in 2024 and 2025 with estimated growth rates of 2.4 and 2.7 percent, the non-energy sector expanded by a significant 5.8 percent in 2022, and a further three percent in 2023.
The non-energy sector is projected to grow by 2.6 percent in 2024 and two percent in 2025.
“Additionally, inflation is now again on the decline. After several years of historically low levels, reaching as low as one percent in 2019, the worldwide effects of COVID-19 caused inflation in Trinidad and Tobago to peak at 8.7 percent in December 2022.
“However, this was still below the 16.9 percent average inflation experienced in other Caribbean countries. Our inflation in 2022 was, in fact, half the rate in the rest of the Caribbean. Significantly, our annualized rate of inflation, which was 5.8 percent in 2022, is now projected to be 5.1 percent in 2023 and 3.4 percent in 2024 and 2025.”
Imbert said that for the first time in more than ten years, Trinidad and Tobago recorded a fiscal surplus in 2022 of 0.6 percent of GDP.
“We also expect that our fiscal outturn will remain within a range of three percent of GDP over the period 2023-2025 as we closely manage our energy revenues while staying keenly focused on improving public spending efficiency, preserving support for the most vulnerable, and protecting essential capital spending.”
Imbert said that the government firmly believes that capital expenditure must be maintained and expanded, as this creates jobs and stimulates economic activity, thus fostering economic growth.
He said capital spending will, therefore, be a priority for the government going forward, and the government has once again allocated TT$6.2 billion for the Public Sector Investment Programme (PSIP) in 2024.
“This $6.2 billion Programme will be distributed among 1,232 programs and projects. $3.2 billion will go to the Consolidated Fund and three billion dollars to the Infrastructure Development Fund (IDF),” Imbert added.
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