Minister Larry Howai’s budget statement for 2015.
Our economy has performed admirably in the face of the adverse cumulative effects of the difficult external environment and the turbulence in financial markets brought about by the 2008-2009 global financial crisis.
The spill-over impact was inevitable in the context of our increasing economic and financial integration into the world economy; but our strong economic fundamentals provided a substantial buffer which allowed this country to emerge very quickly from the negative effects of that crisis.
We are now encouraged by the strengthening recovery of the global economy. Economic activity is gaining momentum and the International Monetary Fund (IMF) in its July 2014 Outlook is projecting an expansion of 3.4 percent in 2014 and 4.0 percent in 2015. While many economic and geopolitical risks remain, these growth projections for the global economy are good news for emerging and developing countries.
The growth rate in most Caribbean countries has been improving as several economies which are more tourism-oriented are benefitting from the higher levels of growth in the United States as well as from the economic recovery in the United Kingdom. We look to the eventual turnaround of the Euro Zone area to add a further boost to these economies.
In this context, Trinidad and Tobago will benefit from the improving world and regional economy and with our strong macro-economic fundamentals and appropriate monetary policy we will be able to shift our current growth rate to a higher and more sustainable pace.
We have achieved a great deal over the past 4 years and in a very difficult environment:
- Growth has been restored after years of decline. We have had in the period 2012-2014, three years of positive economic growth, notwithstanding extensive and prolonged maintenance activity in the energy sector. The non-energy sector in particular, has shown continued strength and buoyancy;
- This economic growth is taking place in the context of job creation and stable inflation rates.
In the period January-September 2013 the unemployment rate averaged 3.6 percent and the average for the year as well as for 2014 is projected to maintain the same level. The inflation rate had averaged 5.1 percent in 2013; but as at June 2014, the average rate has fallen to 2.8 percent – the lowest in 10 years;
- The fiscal deficit is on course to meet our 2016 objective of bringing the fiscal accounts into balance; notwithstanding the budgeted deficit of $6.357 billion for fiscal 2014, a surplus of $1.967 billion had been realized as at the end of June 2014;
- Public sector debt remains at a sustainable level at 43.0 percent of Gross Domestic Product (GDP) with the external debt service ratio remaining in single digit; these debt ratios are within well-established international benchmarks;
- The balance of payments remains robust with the generation of consistent surpluses on the current account and with steady flows of private direct investment. As a result, gross official reserves stood at US$10.0 billion in December 2013, covering approximately 12 months of imports; by July 2014, the gross official reserves had reached US$10.2 billion;
- Gross foreign direct investment has increased robustly on an annual basis since 2010 and is projected at US$3.3 billion for 2014;
- Substantial financial buffers have been built up to meet contingencies; apart from our healthy official reserves, the Heritage and Stabilization Fund now amounts to US$5.6 billion;
- The rating agencies Standard and Poor’s, Moody’s Investors Services and Caribbean Information and Credit Rating Services Limited, have maintained the country’s excellent investment grade ratings; and
- Access to international capital markets have been facilitated by those ratings with Trinidad and Tobago being able to raise in December 2013 a US$550.0 million 10-year Bond which was
10 times oversubscribed. In short, as a nation, we are better off today than 4 years ago.
In the context of other similarly-placed emerging and developing countries our economic performance has been excellent. Moreover, the foundation has been laid for a sustainable recovery. From this position of strength our economy is undergoing an important transition. Over the medium-term 2015-2017, the growth momentum is expected to be maintained and the balance of payments is projected to continue to generate surpluses and increasing levels of reserves.
Notwithstanding these successes, we recognize that there are many underlying issues which need to be addressed if we are to sustain our growth momentum.
Having dealt with the issue of the return to growth and the financial problems generated by the failure of Colonial Life Insurance Company Limited (CLICO) and Hindu Credit Union (HCU) we are now turning our attention over the medium-term to the reform measures necessary to transform our economy.