THE International Monetary Fund (IMF) on Friday praised the Government’s decisive efforts to sustain the country during the covid19 pandemic and said Trinidad and Tobago now has a very positive outlook for economic recovery next year.
The IMF said TT had faced “unprecedented challenges” in 2020-21, as covid19, energy-production cuts, and price shocks all pushed TT further into recession.
“The authorities’ decisive policy response helped contain covid19’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.”
It said once the recovery is firmed up, the Government must reduce public debt, rebuild fiscal buffers and enable sustainable and inclusive growth.
Finance Minister Colm Imbert said it a Twitter statement, “TT just got positive reviews from our Article IV IMF consultation.”
Minister in the Ministry of Finance Brian Manning told Newsday the report vindicated the Government’s performance.
“It is testament to our proper fiscal management. We are doing everything we can to stabilise our economy and to create an environment for growth, while protecting the most vulnerable citizens.
“The IMF report simply does not give credence to the naysayers.”
He scoffed at an economist who had claimed TT would soon default on its debt and run out of foreign exchange.
Manning said, “The international rating agencies and IMF have said we are doing well, relatively well, in the middle of a global downturn and pandemic.
“We shall continue working to create a positive economic environment for the development of TT.”
The report said covid19, energy production cuts, and a weak global demand had all derailed an incipient recovery in TT.
Measures to curb covid19 had “severely impacted” on non-energy activity, while energy production “declined significantly” with energy exports and revenues “substantially lowered.”
Overall, GDP fell by 7.4 per cent last year and will likely fall by one per cent this year.
However the IMF praised the efforts at recovery.
“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.”
The IMF hailed the Government for giving four per cent of GDP to help the most vulnerable, employment, and companies, while the Central Bank eased monetary and financial sector policies to support liquidity and financial stability.
The report said the deficit rose from 2020-2021 from 3.7 to 11.6 per cent of GDP, while the debt-to-GDP ratio rose to 87 per cent.
However the IMF declared, “A strong economic recovery is projected for 2022. Real GDP growth in 2022 is expected at 5.7 per cent, reinforced by the continued policy support and the anticipated recovery in oil and gas production. Still, output would remain below pre-covid19 levels well into the medium term.”
While the yearly spending deficit is expected to narrow next year due to higher revenues and modest spending cuts, the accrued public deficit will remain high.
Further, the report also said lingering risks to economic recovery exist, including possible new virus strains which may weaken global energy demand and prices, supply-chain issues and residual effects of the recession. The IMF advised, “A sustained and inclusive recovery requires cohesive policy action. Defeating the pandemic and supporting the economy are the immediate priorities.”
It urged a continued vaccine rollout and targeted support to the most vulnerable sectors, plus a covid19 spending report and a contingency plan if downside risks materialise.
Any withdrawal of support must be careful and gradual so as not to undermine recovery, it said.
“The envisaged government expenditure envelope in fiscal 2022 budget is appropriate. The current accommodative monetary policy is appropriate to support the recovery.”
The report supported the Government’s plans for tax reforms and spending control.
“Additional revenue could be generated through tax policy reforms and strengthening tax administration.
“In this regard, the mission welcomed the recent enactment of the gambling tax bill and encouraged speedy implementation of the property tax and the establishment of the Revenue Authority.”
The IMF urged more efficiency in public spending, phasing out subsidies, reforming public procurement, and disclosing the beneficial ownership of public contracts.
The Government should remove restrictions on all current international transactions, while providing sufficient foreign exchange.
The agency hailed TT’s progress against money laundering and financing terrorism, while saying more could be done.
It urged a boost to the non-energy sector.
“Reforms to remove obstacles to doing business, improve education and vocational training to help address skills mismatches and boost productivity, and stimulate entrepreneurship will be important.
“The authorities’ recent initiative to support SMEs and their efforts to enhance the transition to the digital economy are steps in the right direction.”