Question marks over Howai budget update
Finance Minister Larry Howai’s progress report on the first three months of his first budget marks a rare initiative for T&T ministerial economic and financial managers. His update, published in the March 5 Express, serves the useful purpose of keeping an informed public focus on the nuts and bolts of T&T economic performance.
Mixed messages keep being sent about the condition of the economy. The quarterly reports become occasions for authoritative evaluations and projections by the minister bearing political responsibility. The economy, though not in anything resembling free fall, does look “flat” as one economist assessed it.
The continuing deficit in the national budget could also be taken as reflecting a less-than-favourable economic picture. Against such a background, it is heartening to learn from the Minister that in the October-December 2012 period, after years of decline or stagnation, the economy actually achieved a return to GDP growth of 1.5 per cent. This is at least a start, which will now have to be sustained and improved. For the October 2, 2012 Budget had projected 2012- 2013 growth of 2.5 per cent.
An especially encouraging return to growth is that of the energy sector, which had suffered a 7.3 per cent decline in the previous quarter. Still, that sector, on account of lower commodity prices and lower production, delivered to the Treasury 16 per cent less revenue than expected. Despite that shortfall, the budget, under management by the former banker, remained “generally in balance”.
In other hopeful signs, construction showed growth, as did the retail and financial services sectors. Moreover, inflation fell to 7.2 per cent. It is where Mr Howai described the implementation status of Government projects that the largely preliminary or tentative nature of progress showed. Construction of eight of 18 planned police stations is “well advanced” enough to be completed by December 2013. At Cove in Tobago, natural gas processing became a reality.
By contrast, in other areas, the Minister generally characterised developments in terms such as “discussions have commenced”; “proposals…were completed”; “evaluations of tenders are being conducted”; and “steps are being taken to acquire land…”.
Mr Howai concluded by representing the administration’s attitude as “reasonably comfortable” about economic prospects for the rest of 2012-2013. The withdrawal, this month, of two downstream foreign- investment projects fell outside the quarter under review. The collapse of negotiations toward the US$5 billion SABIC methanol complex, however, casts a shadow on industrial development prospects. The shadow lengthened with the later cancellation of the US$600 million Russian Severstal iron and steel project.
Suddenly, at least in relation to foreign investment, question marks began to appear over Mr Howai’s sanguine economic projections. And anticipations inevitably rise high for his next progress report.