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Economy turning around
After two and a half years of financial adjustment, Government’s now seeing its way.
The economy is turning around, revenue collection is up, the energy sector’s booming and the non-oil sector is also growing, Finance Minister Colm Imbert announced yesterday.
“From all indicators, we’re on the road to economic revival. In the words of Johnny Nash: ‘I can see clearly now, the rain is gone.’”
“If I’m allowed some artistic license: “Under this PNM Government, it’s going to be a bright sun-shining (sic) day’.”
Imbert painted a glowing picture of an economic turnaround as the highlight of his mid-year review of the 2018 Budget in Parliament. (See full speech on Pages A15)
In a 51-minute address he added, “We’re not out of the woods yet, but after the sacrifices and prudent fiscal management of the last two and a half years, our economy is turning around.
Our core revenues from taxation are still fragile and still below $40 billion, while we’re running a $50 billion economy, but we’re finally experiencing growth and recovery in 2018.”
This, following adjustment over recent years to extreme reductions in energy prices resulting in a $20 billion revenue loss.
Imbert said, “After a long, discouraging period of economic decline, we’re now witnessing a welcome upturn. Early estimates are indicative of a growth forecast of 2.0 per cent in 2018 and 2.2 per cent in 2019, rising to 2.5 per cent in 2020.”
He said the turnaround is being driven by economic expansion in both the energy and non-energy sectors. Apart from energy sector production expansion, he said adjustments to the oil/gas regime is “already bearing fruit, from a revenue outlook.”
“The pick-up in the energy sector is having a knock-on effect on growth in the non-energy sector, where that sector is projected to break even this year, after years of decline,” he said.
Instead of negative growth of minus 2.6 per cent in 2017, the actual growth figure will be closer to minus 1 percent, he added. He said revenue projections for 2018 are also on-track.
“When deposits in the suspense account at the Treasury are taken into account, we have collected in excess of $19.5 billion in current revenue up to the end of March 2018.
“Our projected capital revenue, largely due to come from the recovery of debt from CL Financial and its subsidiaries, hasn’t yet fully materialised. But we’re making significant progress towards the launch of the National Investment Fund intended to monetize the assets transferred to the Government from Clico and CIB.”
He said the actual fiscal out-turn for 2018 will depend heavily on that fund.
As a result of revenue and expenditure adjustments, the overall 2018 Budget deficit is now being projected at approximately $4.2 billion or over $500 million lower than originally projected, he added.
However, Imbert said high oil prices create a requirement for a high fuel subsidy.
“If oil remains at US$70 a barrel, the fuel subsidy could reach as high as $900 million in 2018, which wasn’t budgeted for,” he said.
“It’s imperative, therefore, that in addition to transforming Petrotrin into a viable profitable organisation, we must also complete the work on an appropriate formula that allows the price of fuel at the pump to move up and down with the movement of the price of refined petroleum products.”
It’s intended to have this in place by the end of 2018, Imbert said, but he didn’t envisage oil/gas prices changing significantly.
See full mid-term budget review speech on Pages A15, A16, A25 and A26.
CURRENT $$$ GROWTH
•Non-oil sector revenue up to April - $4.9 billion.
• Petrochemical sector corporation tax moved from $371 million (2016-2017) to $1.2 billion (2017-April 2018).
• Non-energy sector corporation tax increased between 2017 and April 2018 by $500m to $2.3 billion.
• Total net collections of corporation tax in all sectors are up year-on-year for the period October to April by $1.3 billion.
• Collection of petroleum profits tax and supplemental petroleum tax, excluding royalties, is up by $500 million for the first 7 months of 2018.
• Royalties, excluding Petrotrin, on target to reach $2 billion.
• Expenditure by the end of March 2018 estimated to be $21.69 billion - 15 per cent lower than the originally projected mid-year expenditure.
• Net public sector debt to GDP ratio was 55 per cent, down from 62 per cent in 2017.
• External financial savings were US$8.11 billion - or import cover of over nine months at the end of April.
• Small increase in foreign reserves between March-April 2018.
• Heritage and Stabilization Fund was US$5.87 billion at the end of April 2018 - over US$200 million higher than at the end of September 2015 despite total withdrawals of US$637m.
• No retroactive Property Tax. The waiver concerning payment of Property Tax will be extended to the end of December 2017.
• Legislation for the T&T Revenue Authority requires special majority votes and will be sent to a Joint Select Committee.
• Review of Gaming/Gambling legislation now on, towards finalising the legislation by the end of 2018 and implementation by 2019.
• Procurement regime operational shortly.
• Mobile scanning technology for Port-of-Spain Port.
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