Trinidad and Tobago is experiencing more robust growth after several years of sub-par performance, the International Monetary Fund (IMF) has said.
“With the end of maintenance-related outages in the energy sector, we project the economy will grow around 2.5 per cent in 2014, after growing around 1.5 per cent in 2013. The non-energy sector was fairly buoyant in 2013, which we anticipate will continue to be the case in 2014,” the Fund said in a statement Wednesday, following the completion of its annual Article IV consultation mission to Trinidad and Tobago, led by Elie Canetti, from March 18-April 1.
“The country’s external position remains healthy, with external reserves at US$10.0 billion, while the Heritage and Stabilisation Fund’s assets continue to grow. Serious data deficiencies hinder a more complete assessment of balance of payments developments, but our best estimate is that the current account surplus should continue to be in double digits (as a percentage of gross domestic product or GDP) in 2014, thanks to a strong rebound in energy exports from 2013. However, there are signs that the growth of imports, notably automobiles, may be picking up…The mission welcomes the government’s efforts to significantly reduce or eliminate arrears on energy subsidies, VAT refunds and to suppliers,” the IMF said.
The time for withdrawing the accommodative monetary stance of the past few years may be nearer as the unemployment rate has fallen meaningfully, credit to consumers and for real estate is growing at a relatively rapid pace, core inflation has risen, and interest rate differentials are shifting in favour of US interest rates, the IMF said.
The Fund also said fiscal policy should be set in a long-term context that ensures the country’s non-renewable energy reserves are used as a stepping stone to lasting prosperity. In addition, expenditures should shift away from consuming the country’s resources towards investing them for the future.
The IMF reiterated its previous position that Government quickly move to start ending fuel subsidies, consistent with the Fund’s increasing emphasis on this issue globally.
“Fuel subsidies are extremely costly and inequitable, starving the government of resources that could be better targeted towards poverty reduction. They also induce excessive reliance on automobiles, leading to pollution and traffic jams that have a materially adverse impact on productivity. In addition, overlapping social programmes should be rationalised and better targeted to the less fortunate segments of society. Revenue policies should be aimed at broadening tax bases to ensure a level playing field across activities,” the IMF said.
The IMF noted there has been measurable progress in easing the impediments to doing business and in financial sector reforms, although more remains to be done in both areas, and recommended government should continue to build on its successes to “unlock the country’s full growth potential”.
Beyond that, The Fund noted there remains a critical need for streamlining the government’s structure and improving the efficiency of the public service and the functioning of labour markets.
“The country would also benefit from reforms in procurement, corporate bankruptcy and bank resolution. Finally, we wish to place the greatest stress on remedying the continued shortcomings of the Central Statistical Office (CSO) in generating critical data, which hamper effective policy making and lessen transparency,” the IMF said.