On the 13th May 2019 the Minister of Finance of Trinidad and Tobago, Colm Imbert, presented his 2019 Mid-Year Budget Review. In this and the next two blog entries we begin to explore the main contents of that presentation and the implications of the review for the citizens of Trinidad and Tobago.
The world economy is expected to expand at a rate of 3% in 2019 and 2020 with the Asian economies remaining on a strong growth trajectory and commodity exporting countries like Trinidad and Tobago continuing to gradually recover.
The Minister is confident that as a nation Trinidad and Tobago has successfully weathered the oil price shock that commenced in 2014 and continues to the current day.
In 2015 – the date of the last election – oil prices fell to a low point of US$33 per barrel. During 2016 they fell below this to US$26 per barrel.
The fall in oil prices led to a significant decline in annual energy related revenues available to the Central Government from TT$28 billion in 2014 to TT$8 billion in 2016.
Against this backdrop, according to the Central Statistical Office (CSO) the Trinidad and Tobago economy grew by 1.9% in 2018 reversing the decline that commenced in 2014 as a result of the decline in oil and gas prices.
According to the CSO in the first quarter of 2018 Gross Domestic Product (GDP) grew by 0.9%, 2.1% in the second quarter and 1.5% in the third quarter.
The significance of this is that three consecutive periods of decline would normally equate to an economy in recession, so the Minister is adopting a diametrically opposed position – that is to say that three periods of consecutive growth equate to a recovery of the economy.
The 2019 Budget estimates are predicated on expenditure of TT$51.77 billion and revenue collection of TT$47.72 billion supported by public financing of TT$4.05 billion. The public financing (or budget deficit) represents 2.5% of GDP.
The Minister stated that the economy of Trinidad and Tobago is expected to grow at a rate of 2% annually after 2021 supported by improvements in gas production.
Natural gas production increased to 3.63 billion cubic feet (bcf) per day in 2018 and is expected to reach an average of 3.8 bcf in 2019.
Oil production is expected to grow from 60,000 barrels per day in 2019 to over 80,000 by 2023 as the new oil production company Heritage Petroleum ramps up its efforts. Resumption of refining at Point a Pierre could commence as early as December 2019.
Under the “Belt and Road” Initiative pioneered by China the communities of the south west peninsula will benefit from the construction of a shipbuilding and repair facility at La Brea. In addition, the Beijing Construction Engineering Group executed a contract in February 2019 for the design and construction of the new Phoenix Park Industrial Estate located in Couva.
The Minister noted a number of items designed to strengthen the social net that protects the vulnerable elements of our society.
Over 1,000 affordable housing units have been delivered with an aim to complete 6,000 units by 2020, and to roll out an additional 3,000 new affordable homes per year thereafter.
The government’s efforts to involve the private sector in this area have borne fruit with Republic Bank recently securing a US$75 million loan from the International Finance Corporation – this is the private sector arm of the World Bank – to assist in financing home construction.
In order to finance construction, the government intends to issue Housing Bonds. The government plans to issue the first of its Housing Bonds at a rate of 4.5% over five (5) years. The funds raised will be used to accelerate the housing construction programme with the proceeds from mortgages issued by the Trinidad and Tobago Mortgage Finance Company (TTMF) being used to finance the ongoing development and sale of new housing stock.
The key elements of the proposed Housing Bond are:
In the second blog entry we continue to explore the main contents of that presentation and the implications of the review for the citizens of Trinidad and Tobago.
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