In the midst of the expressions of criticisms and support for the budget from different groups, attention needs to be paid to how the economy performed during the 2013-2014 period.That is important to place the prospects for meaningful growth in the coming year/s in perspective, as there is no indication that in 2015 there is likely to be any dramatic departure from what has gone on over the last two years.
The Review of the Economy put out by the Ministry of Finance and the Economy records significant declines in major sectors: crude oil and condensate production, asphalt, natural gas production, agriculture, tourism, manufacturing and LNG production. And while production and export of certain petrochemicals increased during 2014, export prices on at least two of those products, ammonia and urea, declined, states the Review.
It is growth in the services sector, finance, restaurants and construction which collectively resulted in the 1.9 per cent growth of 2014.An examination of developments in the Public Sector Investment Programme shows the revised expenditure figure at $9.1 billion, and while it is not clear if that figure was actual expenditure, what is certain is that only a small number of the projects was directly related to generating economic growth.
So while the many infrastructure projects and those of the Ministry of National Security are very important, there is need for a focus on direct economic projects which could make a contribution to growth in the economy. It is therefore against this background that the projections for growth must be judged.
One very encouraging statement by the Finance Minister is the estimated US$9.5 billion in foreign direct investment which will be expended in the energy sector over the next three years.But as is known by the experience, the largest beneficiaries of FDI are not necessarily local companies, nor the Treasury.
Moreover, many of the projects have fairly long lead times before they can begin to pay dividends. So more information on the expenditure patterns to be adopted by the corporations needs to be known before the value to T&T of this US$9 billion in FDI can be decided with any certainty.Another worrying aspect of the 2015 budget is the lack of a plan of action to begin a cutback on the annual billions expended on the gasoline subsidy.
It is a complex matter and successive governments have refused to confront the reality. It is clear that the Government chose not to take on that responsibility in an election year.Moreover, measures to ameliorate the impact of a reduction in the subsidy have not been realised; one such measure being the long-talked about transfer to mass usage of compressed natural gas (CNG).
A second measure which could earn increased revenues for productive investment is the absence of action to bring larger numbers of people into the taxpaying system. For obvious reasons the returns that could accrue from yet another tax amnesty will begin to dwindle as those within the tax net meet payments on outstanding taxes.
Likewise, yet another year has gone by without the promised return to developing a fair system for property owners to contribute to revenues.In all, no firm indicators have been presented in the budget which could bring about a transformation of the economy, and the minister must clarify this vital aspect of his proposals.