PORT OF SPAIN, Trinidad – The Trinidad and Tobago government Monday reported strong economic indicators for the first half of this year with revenue being estimated at more than TT$706 million above what had been budgeted for in the 2019 fiscal package.
Simply put, sound and stable macroeconomic conditions, in particular low inflation and stable interest rates have laid the foundation on which savings and investment are being generated in an environment of certainty with improving prospects for growth,” Finance Minister Colm Imbert said, as he delivered the Mid-Year Review for fiscal year 2019.
He said the fiscal outturn for the first half of 2019 for the fiscal accounts points strongly in the direction of fiscal sustainability.
“Our 2019 budget was predicated on an oil price of US$65 per barrel and a gas price of US$2.75 MMBtu. Current prices are not deviating significantly from these assumptions. However, global energy prices declined by 17 per cent over the period October 2018 – February 2019, which resulted in a loss of revenue, in particular royalties on oil and supplementary petroleum tax.”
Imbert said that oil prices fell after recording a high of US$70 per barrel in October 2018 to a low of US$49 per barrel in December 2018; but since then prices have recovered to an average of US$63 in April 2019.
He said gas prices are now hovering around US$2.65 per MMBtu; but over the period October 2018 –April 2019, the price was US$3.26 per MMBtu.
“Madam Speaker, revenue in the first half of 2019 was TT$706 million above the programmed revenue estimated in the context of the budgeted $47.72 billion for the year. On the other hand, as a result of our tight cash flow situation, expenditure in the first half of 2019 was $2.55 billion below the programmed expenditure, in the context of the total budgeted for the year of TT$51.77 billion.
“The originally estimated fiscal deficit for 2019 was TT$4.05 billion; but for purposes of administration, with capital revenue programmed for the second half of the year, a deficit of $5.11 billion was programmed for the first six months of the year. However, the actual recorded deficit for the first half of 2019 was only TT$1.85 billion.”
Imbert said that this performance is another indication of the government’s ability to manage the country’s finances prudently and carefully, adding that the “achievement of the stabilization objectives with revenue and expenditure now in broad alignment represents a solid foundation on which transformation and growth would now be anchored”.
Imbert said that the increase in government’s revenue was mainly due to higher than anticipated receipts from taxes on income and profits, international trade, non-tax revenue as well as capital revenue.
He said these increases were partially offset by lower than anticipated receipts from taxes on goods and services, estimated at TT$578 million.
“Madam Speaker, the better than projected performance of taxes on income and profits was primarily due to higher receipts of TT$452 million from other companies. However, this was offset by lower than projected receipts of TT$395 million from oil companies, as a result of the 17 per cent decline in oil prices in the first quarter of fiscal 2019.
“Non-tax revenue also performed above expectations due in the main from equity profits from the Central Bank and state enterprises. Capital revenue was also higher than expected due to a number of transactions related to the repayment of debt owed by CLICO to the government.”
Imbert said recurrent expenditure for the first six months of the year was lower than anticipated at TT$23.63 billion, with reductions in expenditure in goods and services and interest payments amounting to TT$1.47 billion.
The Finance Minister said that the government has recognised the importance of the achievement of sustainable growth, not only the overall fiscal position but the very nature of the expenditure being envisaged.
“As a result, we intend to direct resources into areas which would support not only the private sector in its business activities but also in enhancing growth and development, including infrastructure rollout, including roads, highways, bridges and hospitals”.
He said the government would also be discharging arrears to commercial suppliers and contractors as well as liquidating value added tax (VAT) refunds, with a view to improving business conditions.
“As a result of our policy of maintaining key public sector investment, in particular in the areas of infrastructure as well as to put our tax relations with the commercial sector on a current basis, total expenditure has been revised upwards to TT$52.07 billion, an increase of approximately $300 million over the budgeted 2019 expenditure of TT$51.77 billion.
“On the other hand, because of lower oil total revenue which was budgeted at TT$47.72 billion is projected to fall by $221.0 million to $47.50 billion with a resultant overall fiscal deficit of TT$4.57 billion compared with TT$4.05 billion as budgeted.”
Imbert said that the oil price assumption used in the 2019 budget statement will be adjusted to US$60 per barrel of oil, but with gas prices averaging US$ 3.26 per MMBtu over the period October 2018 – April 2019, the gas price assumption has been revised upwards to US$3.00 per MMBtu from US$2.75 used in the original 2019 budget.
He said that the government is also providing through supplementation a much needed TT$1.839 billion for the envisaged expenditure in 18 areas.
In his presentation, Imbert said that the Central Statistical Office (CSO) last October had estimated that the Trinidad and Tobago economy had grown in real terms by 1.9 per cent that year, reversing the decline that started in 2014.
“The news of an economic turnaround was met with cynicism by those opposed to us and by a number of perennially negative commentators who seem to only comfortable only when things are going badly,” Imbert said, adding that “I have even heard it said that one per cent growth is nothing to shout about,
“However, since the last budget statement, we have had confirmation of our economic recovery from the major international agencies, such as the IMF, the United Nations Economic & Policy Analysis Division and the World Bank,” he said.
He said figures produced by the CSO also show that in the second quarter of 2017, the GDP declined by 5.6 per cent, 3.3 per cent in the third quarter and 1.9 per cent in the last quarter.
“You will observe that the decline in GDP was slowing down as the year progressed, hence the reason why the IMF said that our economy began to improve in 2017,” he said, adding that following the first quarter last year, the GDP switched from negative to positive, growing by 0.9 per cent.
“This was followed by growth of 2.1 per cent in the second quarter of 2018 and growth of 1.5 per cent in the third quarter,” he said, adding “this is actual data, not projections, and according to the CSO, therefore, we have had three consecutive quarters of economic growth in 2018.
“For those who may be side-tracked by the barrage of misinformation that comes from uniformed or biased commentators, three consecutive quarters of growth after a period of decline is a clear indication of an economic recovery.
“We await the final figures for the 4th quarter of 2018 from the CSO, to confirm the actual growth figure for 2018,” Imbert added. – CMC