STANDARD and Poor’s (S&P) downgrade of TT’s credit rating from BBB+ to BBB is no surprise. This was the view yesterday expressed by former government minister Mariano Browne, economist Dr Vaalmiki Arjoon and TT Chamber of Industry and Commerce CEO Gabriel Faria.
Browne did not share the Prime Minister’s optimism about S&P’s economic outlook for TT. He said the report does not provide any evidence that the necessary steps are being taken to balance the budget. Browne recalled former finance minister Larry Howai promised to balance the budget by 2016 but never did so. As TT sits on the cusp of successive elections, Browne doubted the issues raised in S&P’s outlook would be addressed by the Government.
“We are in a difficult position,” he said. Browne explained that the stable economic outlook which S&P gave TT, means “we are at the bottom of the trough.” He said there is no indication as to which direction the economy will go. Browne said TT’s situation was similar to a frog in a pot of water, which is being slowly boiled and the frog does not know its being boiled alive until it is too late.
Arjoon said, “The most direct implication is that we will face increased difficulty in accessing loans from foreign countries.” He said decline in revenues in recent years, continued under performance in the non-energy sector and expected fall in LNG production from Atlantic Train One, means “we will attempt attempt to acquire more debt from the foreign market, to meet our budgetary obligations, especially since we are going into elections mode.” Arjoon said TT’s debt repayment capacity will become more challenge and “our economy as a whole continues to be risky.” He added “The downgrade also signals increased uncertainty and shattered confidence in the economy.” Arjoon warned that if we are not careful, the state will continue to borrow in the coming years “ which will continue the cycle of downgrades and financial stress.”
While the consolation was the outlook was stable, Faria said stable is not acceptable in our current situation. “Continuing to do what has been done will result in a predictable outcome. Stable performance at best,” he said. Faria said it is important for Government, business and labour to work together to move the outlook from stable to positive. He evidence of this can be found in Jamaica, where all stakeholders worked to improve that country’s economy.
“To change these outcomes, we have to stop reacting and take a decisive and proactive approach to deal with the situation. Faria also said the revenue authority must be implemented as soon as possible “to improve tax collection rather than continuing to increase the tax burden on the individuals and organisations which are already compliant.” He said S&P also referred to a lack of timely economic data. Faria observed this is something that has been discussed for so long “but is still outstanding.”