IMF predicts growth for Trinidad
Washington – The International Monetary Fund (IMF) Friday predicted a “strong economic recovery” for Trinidad and Tobago, projecting that real gross domestic growth is expected at 5.7 per cent in 2022.
In a statement following the virtual 2021 Article IV Mission, the Washington-based financial institution said the economic growth is reinforced by the continued policy support and the anticipated recovery in oil and gas production.
“Still, output would remain below pre-COVID-19 levels well into the medium-term. With demand pressures contained, headline inflation in 2022 is projected at about 2.4 per cent,” the IMF said, adding that the current account surplus will remain high over the medium term, supported by the recovery of energy exports, and foreign reserves would be at around seven months of imports.
“While the fiscal deficit is expected to narrow, public debt will remain high. The fiscal deficit is projected to narrow to 7.5 percent of GDP in financial year 2022, reflecting a combination of higher revenue mobilization and modest spending cuts.
“Over the medium term, the fiscal deficit is projected to gradually narrow and reach balance by financial year 2027. Central government debt will peak at about 69 per cent of GDP in financial year 2023 and gradually decline, while public debt would remain above the soft target of 65 per cent of GDP over the projection horizon.”
The IMF said that Trinidad and Tobago faced unprecedented challenges in 2020-21. It said the combined effects of COVID-19, energy production cuts, and price shocks pushed the economy further into recession.
But it said the authorities’ decisive policy response helped contain COVID-19’s spread, protect lives and livelihoods, and pave the way for a strong recovery.
“The immediate priorities are to accelerate vaccinations and support the economic recovery. Once the recovery is firmly in place, policy attention should focus on reducing public debt levels and rebuilding fiscal buffers, supported by a credible fiscal framework.
“The Central Bank should remain vigilant to any build-up of financial vulnerabilities. Structural reforms remain vital to support sustainable and inclusive growth,” the IMF noted.
The Washington-based financial institution reiterated that stringent COVID-19 containment measures severely impacted non-energy domestic activity.
It said energy production declined significantly in 2020 and further in early 2021 due to unanticipated maintenance activity in some energy facilities and the closure of several petrochemical plants. “Combined with weaker global demand and the drop in energy prices in 2020, these factors substantially lowered energy exports and revenues. Consequently, real GDP contracted by 7.4 per cent in 2020 and is estimated to further contract by one per cent in 20 21.
The IMF said the authorities acted decisively to contain the pandemic. Containment and health measures to fight the virus limited the number of cases and fatalities despite waves of infections.
Progress on vaccination efforts is ongoing, with about 45 per cent of the targeted population fully vaccinated as of November 15.
Moreover, the government introduced a fiscal policy package of about four per cent of GDP to help the most vulnerable, employment, and firms, while the Central Bank of Trinidad and Tobago (CBTT) eased monetary and financial sector policies to ensure adequate liquidity and preserve financial stability.
In its report, the IMF said that the risks to the outlook for Trinidad and Tobago are tilted to the downside. It said the emergence of new virus strains could derail the global recovery, which would likely weaken global energy demand and prices, thus intensifying the economic impact on Trinidad and Tobago. (CMC)