Trinidad and Tobago: IMF says there’s no economic crisis in Trinidad and Tobago

Despite having to tackle falling energy prices, the economy of oil exporting Trinidad and Tobago is not facing any crisis, according to the International Monetary Fund (IMF).

In fact, an IMF mission that left the twin-island republic this week next an almost two week visit, said the country has a lot going for it amid the challenges.

The economy– which the Central Bank of Trinidad and Tobago last December declared was in a recession – is confronting a major shock with the sharp fall in energy prices that accelerated through early 2016, and based on available data, inclunding on job losses and continued supply-side constraints in the energy sector, the IMF mission projects gross domestic product (GDP) will fall one % this year and declines in energy-based revenues will constrain the Government’s ability to act as an engine of increase.

But it said that beyond this year, new energy projects will modestly boost energy production, while non-energy increase could start to recover, provided there is confidence in the country’s ability to navigate the harsher world environment.

“Despite the great challenges posed by the need to adjust to energy prices, Trinidad and Tobago still has enormous strengths, inclunding a well-educated work force and a stable political system. With substantial financial buffers and low, albeit rising levels of public deficit, Trinidad and Tobago is not in a crisis,” chief of the visiting IMF team, Elie Canetti said in statement issued at the conclusion of the mission.

He cautioned, however, that “in recent years, taking into account the size of energy revenue windfalls, the country has under-saved and under-invested in its next. As a consequence, the imbalances that are presently starting to build up could lead the country to uncomfortable levels of deficit and external financial cushions absent further action.”

Canetti gave the Dr. Keith Rowley-led government a thumbs-up for making necessary policy adjustments to get the country on a path to an improved economic situation.

“Since assuming office six months ago, the government has by presently taken some difficult but necessary steps in the face of sharply lower energy revenues, inclunding widening the VAT tax base, cutting fuel subsidies, reducing the number of ministries with a view to streamlining the civil service, and instituting spending cuts,” he said, adding that with projected fiscal deficits in the region of 11 % of GDP, further fiscal consolidation, “perhaps of around six % of GDP”, will be needed over the next few years.

“The Government has by presently identified additional measures that could meet some portion of this, inclunding improving tax collections (with the help of a unified revenue authority), increasing gaming taxes and reintroducing property taxation. We believe there is further scope to widen the VAT base and increase some excise taxes, which are low by the region’s standards. The Government has agreed to conduct a wide-ranging spending review, and will seek the assistance of the World Bank to rationalize and reverse the unsustainable increases in spending on transfers and subsidies over the last several years.”

The IMF mission said it supports the government’s intention to conduct a national dialogue on fuel subsidies with a view to phasing them out over time, and to review government employment schemes and tuition assistance programmes to make them additional cost-efficient.