Economist on Mid-Year Review: economy and public finance still need restructuring

Much work remains to be done to restructure TT's economy, says economist Garvin Joefield.

Commenting on the 2018 budget Mid-Year Review (MYR), Joefield told Newsday, "Given recent and expected positive developments in the energy sector, it is important to remember there is still much work to do in terms of restructuring the domestic economy and public finance. We must not allow the expected gains from the energy sector to shift our focus away from these important goals.

"Since economic diversification takes a long time to accomplish, the energy sector will continue to be the main engine for some time. However, it is in our own interest and that of future generations to do all we can to enhance the ability of the domestic economy to withstand negative external shocks when they occur."

Joefield said the MYR sought to accomplish two things.

"The first was to provide an update on the macroeconomic environment and to highlight progress on a few key initiatives. Secondly, the MYR gave government the opportunity to trumpet what it considers to be its successful management of the economy in the face of daunting challenges."

Most notable, Joefield said, was that even in the face of improving tax collection, government's finances remain in a very challenging position.

"(Imbert) highlighted the difficulty of managing what he referred to as a $50 billion economy with $40 billion revenue. In this regard, the inability of Petrotrin to pay taxes and royalties to government is indeed unfortunate. With the company producing almost 60 percent of the country’s oil, TT will lose much of the benefit of the current rally of prices...At current oil prices, the government stands to lose $1 billion in revenue in 2018."

Joefield said this has significant implications for public sector revenue and foreign currency earnings, notwithstanding the major role played by gas. He therefore expects government will continue to rely on extraordinary revenue measures in the 2018-2019 budget.