RBC Financial (Caribbean) Limited’s Group Economist, Marla Dukharan, cited a report by the International Monetary Fund (IMF) on this very thing during her presentation at the October 6 post-budget forum hosted by the American Chamber of Commerce of Trinidad and Tobago’s (AmCham) at Hilton Trinidad, Port-of-Spain.
“Trinidad is known for having low fiscal multipliers, meaning fiscal spending is not very good at generating growth in this country.
As a matter of fact, statistics coming out of some empirical research done (by) the IMF shows that a one percent rise in government spending increases GDP growth by only 0.07 percent in the second year, not in the current year.” “This means that we need private sector-led growth, as opposed to fiscal spending to stimulate growth, and actually the Finance Minister (Colm Imbert) alluded to that. He said, ‘We will now depend on the private sector’s willingness to expand investment and production for export markets.’ Just one line but which to me, is consistent with that view that we can’t rely on fiscal spending to promote growth going forward,” Dukharan stated.
The RBC Group Economist said she was “uncomfortable” with budget estimations of TT $55 billion being generated from an increase in some taxes and the reintroduction of Property Tax, since “the non-energy sector is driven mainly by fiscal spending and fiscal spending comes from partly the energy sector.” Dukharan pointed out that Imbert has budgeted a ten percent increase in total revenue; to $60.3 billion over and above the $61.8 billion or so generated in 2014/2015.
“Only $5.5 billion is coming from the energy sector as opposed to $20 billion to $30 billion that we normally get, which means out of the $60 billion or so in total revenue...the non-energy sector has to generate about TT $55 billion. That’s unprecedented.” Dukharan also said this made her “a little bit uncomfortable with how the non-energy sector is going to generate all of this revenue” because TT’s economy contracted by almost two percent during the first six months of 2015.
The economist also shared her thoughts on future growth, saying “I think we’re going to continue to see the economy contract this year.” “I don’t think that should be a surprise; we already saw a two percent contraction in the first half of this year. If we have any growth next year, it will be very low. It will be close to zero percent, which is my view,” Dukharan said.