geisha.kowlessar@guardian.co.tt
The International Monetary Fund (IMF) said yesterday the Trinidad and Tobago economy has a positive outlook but looming uncertainties.
Writing in the concluding statement of its 2023 Article IV mission, the IMF mission said the recovery in the T&T is expected to gain broad-based momentum this year with a projected GDP expansion of 3.2 per cent.
“Over the medium term, new energy projects will come into production but as oil and gas fields mature, potential growth will slow down to 1.5 per cent,” said the IMF team.
It projected that inflation in T&T is projected to slow down to 4.5 per cent by end-2023, compared to 8.7 per cent at the end of 2022.
“Waning gas and petrochemicals exports starting in 2024 and the anticipated decline in global energy prices, will result in a narrower current account surplus, averaging 6.7 per cent of GDP.
International reserve coverage is projected to remain adequate at around 6.5 months of prospective total imports by 2028.
The IMF also said T&T’s fiscal position is expected to swing from surplus in the 2022 fiscal year to a deficit in 2023, and then stabilise at moderate deficits over the medium term.
“The fiscal balance is projected to deliver a deficit of 2.8 per cent of GDP in the 2023 fiscal year. This reflects lower energy revenues due to declining prices and domestic production, and increased capital spending. The deficit is expected to persist over the medium term which could widen with the outcome over the ongoing public sector wage negotiations,” said the IMF.
It noted that central government debt declined to 53.8 per cent of GDP (from 60 per cent of GDP in 2021) and gross public debt declined to 71 per cent of GDP (from 79.2 per cent of GDP in 2021).
Public financial buffers remain strong with total assets in the Heritage and Stabilisation Fund (HSF) at US$5.0 billion (18.6 per cent of GDP) by end-financial year 2022.
International reserve coverage is projected to remain adequate at around 6.5 months of prospective total imports by 2028, the IMF also noted.
Further, it said, real GDP is estimated to have expanded by 2.5 per cent in 2022, supported by the non-energy sector which was partially offset by an unexpected weak performance of the energy sector.
The IMF also noted that banks’ credit to the private sector is recovering and the banking sector appears well-capitalised, liquid, and profitable, adding that the current account surplus expanded, and foreign reserves coverage remained adequate at 7.6 months of prospective total imports.
Also, it said higher global energy prices and prudent consolidation measures contributed to a fiscal surplus and a decline in public debt in 2022.
“The overall fiscal balance registered a surplus of 0.3 per cent of GDP in 2022—for the first time in over a decade and after a record deficit of 11.7 per cent of GDP in 2020,” the IMF noted.
The surplus, it said, reflects higher than anticipated energy revenues, some spending cuts relative to the budget, and the reduction of the fuel subsides.
On promoting economic diversification and a green economy, the IMF said this country’s economic diversification process requires supporting policies to address structural bottlenecks.
In order to develop a sound and stable macroeconomic environment, the IMF is encouraging T&T’s authorities to step up their efforts towards improving the business environment by delivering on measures (e.g., infrastructure, governance, trade policy, education) laid out in the Vision 2030.
Additionally, the IMF said there is a need to step up the efforts to secure an economic transformation to deliver a sustainable and inclusive economy.
“The energy sector will remain the country’s main growth engine in the near to medium term,” the IMF said, adding that its staff welcome this country’s efforts to take advantage of its existing petrochemical infrastructure and know-how to transition into clean energy.
At the same time, the IMF advised that there is scope to diversify its exports products and markets.
The IMF also welcome the country’s digitalisation agenda to deliver more efficient public services, improve the business environment, and enhance the social safety net.
On the energy front, the IMF noted that T&T’s actions to reduce greenhouse gas emissions are commendable.
It cited several renewable energy projects are being developed to meet the 30 per cent target of renewable energy sources by 2030.
IMF staff also encouraged the authorities to continue advancing on these initiatives and welcomes their new green hydrogen strategy for the energy transition. Efforts to integrate the climate change considerations in the financial sector supervision are also welcomed.