GEISHA KOW­LESSAR-ALON­ZO

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.