2018 Mid-Year Review – A minefield of deception Part 2

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The TTWhistleblower today continues an analysis of the Keith Rowley Administration’s 2018 Budget Mid-Year Review, paying particular attention to the claims by Finance Minister Colm Imbert that Trinidad and Tobago has ‘turned a corner’.

The Standing Finance Committee of Parliament met on Tuesday 08 May 2018 to discuss how the 2018 budget would be supplemented and varied in expenditure. Debate on the almost $800 million in changes took place two days later.

Today, we continue our analysis of the claims emerging from the debate.

NON-ENERGY

Colm Imbert boldly asserted that the claim of a “turnaround is being driven by economic expansion in both the energy and non-energy sectors.”

Non-energy refers to the sectors outside of the energy sector some of which include Manufacturing, Financial Services, Transport, Construction, Distribution and Transport, all of which rely on local economic activity and increased trade relations with other economies.

Imbert referenced Trade in his mid-year review just twice.

What he did not mention was in addition to the sectors’ performance on their own, some of the sectors rely on healthy trade with other nations.

Imbert made absolutely no mention of these trade deals, all negotiated by the People’s Partnership Government:

•          Trinidad and Tobago-Panama Partial Scope Trade Agreement;

•          Trinidad and Tobago – Guatemala Partial Scope Trade Agreement;

•          World Trade Organisation (WTO) – Agreement on Trade Facilitation;

•          Trinidad and Tobago – El Salvador Partial Scope Trade Agreement;

•          The Cariforum/EC Economic Partnership Agreement;

Each of these agreements has the potential to expand trade markets, increase export volumes for manufacturing and services and ultimately, increase this country’s earnings of Foreign Exchange.

Foreign Exchange reserves have fallen by over US$2 billion in two and a half years, hurting this country’s import cover with a reduction from 12 months to nine months of cover.

More than those obvious issues, however, is the stark contradiction between the con-job by the Finance Minister, and the facts stated in the March 2018 issue of the Central Bank’s Economic Bulletin

In the Economic Bulletin, just two months before Imbert’s ‘miracle’…or deception, the non-energy sector was addressed squarely in the context of its performance and contribution: “Sluggish activity in the non-energy sector, in particular, the distribution and construction sectors.”

It was also noted that the sales of new motor vehicles fell by 14.6 percent as the sales of both private (17.1 percent) and commercial vehicles (9.3 percent) showed year on year decline over October to November 2017.

More important is that in the first quarter of 2017 the unemployment rate was at 4.5 percent compared with 3.8 percent in the first quarter of 2016. The number of persons with jobs fell by approximately 6700, while the number of persons without jobs increased by 5000.

More disturbing is that the non-energy sector continues to struggle – the very sector that is critical to economic diversification, which Imbert mentioned only ONCE in his entire contribution to start debate on the Mid-Year Review.

According to the Central Bank Economic Bulletin the Distribution Sector was estimated to have contracted by 3.6 percent (year-on-year), evidenced by a fall of 2.5 percent in the Index of Retail Sales.

The sales of construction and hardware materials, as well as household appliances and furniture, continued to decline.

The Finance, Insurance and Real Estate sub-sector contracted (1.0 percent). A sector that should have become the leading motivator for economic diversification actually hit a downward slide.

Construction remained weak but there was improvement in sales of mined aggregates (6.6 percent), the first increase since the first quarter of 2015.

Local sales of cement continued to fall (4 percent) in the third quarter.

Manufacturing contracted by 0.5 percent during the quarter.

The Transport and Electricity and Water sectors also recorded declines, of 0.8 percent and 0.1 percent.

Unemployment among youths was found to be particularly high compared with other age categories. Unemployment among the 15-19, 20-24, and 25-29 age groupings were 19.8 percent, 10.3 percent, and 7.3 percent, respectively.

Even more discouraging is that despite the fact that Imbert spoke boldly about his false claims of the PNM Government ushering in energy transformation, in the first quarter of 2017, the largest year-on-year declines in employment were recorded in the oil and gas (4,800 persons) and construction sectors (4,500 persons).

Despite all of these facts, based on data collected and analysed by highly skilled professionals at the Central Bank of Trinidad and Tobago, we were still forced to listen to Imbert’s false claim that: “It is clear, therefore, that not just the oil sector, but the non-oil sector is finally recovering.”

More shameless was his claim that it was the PNM’s doing! The fact is that the Central Bank’s findings are the PNM’s doing!

DEBT AND GDP

Looking to public debt and gross domestic product, we find in Imbert’s own publication, Review of the Economy 2017 that: “Net Public Sector Debt is anticipated to increase by 7.1 percent from $87,508.2 million in fiscal 2015/2016 to a projected $93,742.4 million by the end of fiscal 2016/2017.”

“Based on revised GDP, Net Public Sector Debt as a percentage of GDP is estimated to rise from 58.3 percent at the end of fiscal 2015/2016 to 62.4 percent at the end of fiscal 2016/2017.”

But in his Mid-Year Review, Imbert stated: “This improved outturn for 2017 and the expected growth in 2018 will have a substantial effect on our nominal GDP, which is expected to increase by 9% to TT$168 billion in 2018. This will also have a direct positive effect on our debt to GDP ratio, which is now estimated to drop to well below 60%, even with the planned borrowing programme in 2018.”

Imbert’s own review of the economy for 2017 stated: “CSO estimates: 2016 GDP of $148,745.0 and 2017 GDP of $149,684.7.”

It should be noted that GDP in 2015 stood at $155,624.5 million.

What is clear is that Imbert needs to tell Trinidad and Tobago the recipe for cooking up the figures that he is now using.

Imbert claimed that Trinidad and Tobago’s debt to GDP ratio has been reduced to 55%, down from 62%.

Even as Imbert made his claims of a reduction in the debt to GDP ratio, what is more important to people is the actual amounts being borrowed and what is owed.

According to the Central Bank Data Centre, as at December 2017, total Government debt outstanding stood at $91,150.0 million. By December 2015, just a few months after the PNM took office that figure stood at $78,592.0 million; a 16 percent increase in just about two years.

Whatever the percentage in relation to increasing revenue and higher personal and corporate taxes bringing in more earnings from the private sector, the fact is that Trinidad and Tobago’s debt burden has increased by billions.

So as the Government continues with a reckless borrowing programme and continues using billions of dollars in capital finances to ‘pay bills’, the claim of turnaround makes absolutely no sense whatsoever.

Even if we were to look at Foreign Direct Investment, which Keith Rowley said amounted to approximately TT$10 billion because of his Houston trips, again the Central Bank of Trinidad and Tobago tells a different story.

As discussed in part one of this analysis, direct investment in 2012 stood at US$2,093.8 million and in 2013 US$1,192.5 million, owing largely to an influx of new energy investments which are now delivering benefits.

Direct Investment in January to September 2017 stood at US$-70.9m (negative seventy point nine million US dollars).

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