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Some gains, some issues to watch

Natalie Briggs Thursday, May 18 2017

Economist and UWI lecturer, Dr Roger Hosein, has said there are positives emerging out of the last week’s mid-year budget review.

According to Hosein, government has been able to control inflation in spite of a partial removal of the fuel subsidy and some depreciation of the TT dollar.

He also noted that the review has provided signs that the economy is stabilising through several natural gas projects due to come on stream. However, he said other sectors of the economy continued to be neglected.

“I think there was too much focus on the energy and too little focus on the non-energy sector plans,” said Hosein. “While there have been gains made with respect to Sercan, TROC (Trinidad Onshore Compression Project) and Juniper and the progress of the Dragon field is an event for celebration, the truth is the long-term future of the TT economy requires that the non-booming tradable segment of the economy get more attention.” The economist also said the push to implement the property tax to supplement revenues, as well as set up a tax revenue authority were laudable and would help strengthen the revenue base given the continuous shortfall of energy earnings.

However, the UWI lecturer said he is surprised by the continued refusal to devalue the dollar. “I don’t think we need to wait for the stock of international reserves to disappear before we devalue. I think the manufacturing sector needs the jolt as the cost of labour in TT is relatively high,” said Hosein. He also thought more use could be made of the construction sector to stimulate the economy.

“One was hoping that at least one project like the highway to San Fernando would have been mentioned in the midterm review, because one or two big projects like that could have formed the basis around which economic activity could have revolved.” The prime minister and several ministers of government re-commissioned the construction of the highway from San Fernando to Point Fortin on Monday.

Hosein also questioned whether the assumption of a 5.1 percent in nominal GDP was reasonable.

“The data for the manufacturing and the energy sectors available up to this point does not aggressively permit an assumption of a 5.1 percent increase in nominal GDP for fiscal year 2017,” said Hosein.

“Natural gas production for fiscal year 2017 was 93.1 percent of production in fiscal year 2015/16 and this may likely dampen energy sector fiscal revenues. At the same time the manufacturing capacity utilisation index didn’t show any pronounced increases and so the expected 5.1 percent growth in nominal GDP growth does not seem to be emanating from this source either.”

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