An unenviable task is ahead for Finance Minister Colm Imbert as he prepares to present a mid-term budget review. Economic pain inflicted by COVID-19 and declines in revenue that pre-dated the onset of the pandemic will not make for encouraging fiscal news for a country on the cusp of a general election.
There is very little wiggle room, given T&T’s high deficit and public debt to avoid measures to get the economy back on its feet.
For energy-dependent T&T, an estimated 50 drop in commodity prices between January and March is expected to result in a revenue loss of TT$ 4.5 billion. The lower global demand for methanol will add to that loss.
The country is only just resuming activity in the various sector following the prolonged closure of non-essential businesses and services. It will take some time to recover from this strain on the economy
The disruption of earnings in the tourism sector is being felt in Tobago where that industry is a major provider of employment and source of revenue. It is an important non-oil contributor to GDP in T&T, with an estimated share of 7.6 per cent.
Even with the gradual lifting of restrictions, the future is not bright for the sector which is expected to suffer a major contraction in the coming months
When the Road Map to Recovery Committee was appointed to work out a plan for T&T post-COVID, Prime Minister Dr Keith Rowley spoke about a future that requires the rebuilding of the country’s productive sector, creating employment, boosting productivity, manufacturing, trade and the services sector, improving revenue collection and reducing unsustainable expenditure.
That is much easier said than done, as Mr Imbert and the technocrats in the Finance Ministry are discovering as they crunch the figures and try to come up with a somewhat palatable fiscal presentation.
One of the items they should keep a wary eye on is the unsustainable $5 billion annual food import bill, due in large part to years of underdevelopment of the agriculture sector. In its current state, still predominantly small-scale, and contributing less than one per cent to GDP, the sector is a long way off from satisfying the food needs of our 1.4 million population.
In April, the International Monetary Fund (IMF) revised its forecasts, factoring the effects of COVID-19.
The agency’s projects included a decline in GDP growth to -4.5 per cent, with a best-case scenario of an improvement to 2.6 next year. However, improvements will be contingent upon a bigger push to diversify the economy.
The IMF calculated the 2019 gross debt at 49.7 per cent, with 52.5 per cent and 54.8 per cent forecasted for 2020 and 2021,
These are not encouraging projections for a country facing the challenges of an ageing population, low productivity, where 20 per cent of the population lives below the poverty line.
In past mid-term reviews, Mr Imbert has claimed that he has carefully managed the economy. It would be interesting to hear how he accounts for the fiscal management in these rough post-COVID times.