T&T... Moody’s and IMF reports show weak economy

link sgtdjones Joined: Feb 15, 2017
Posts: 26957
11/25/21, 3:45:09 PM 
T&T... Moody’s and IMF reports show weak economy

The recent statement by the IMF press confirms what is already know: that the T&T economy is out of balance on both external and internal accounts, exacerbated by the necessary response to the COVID-19 shock, says economist Dr Terrence Farrell.On Friday November 19, the International Monetary Fund (IMF) concluded its two-week annual visit to this country and published its independent assessmentIn the concluding statement of the IMF’s 2021 Article IV mission to T&T, the Washington DC-based institution said the domestic economy is expected to grow by 5.7 per cent in real terms in 2022.The growth next year will be “reinforced by the continued policy support and the anticipated recovery in oil and gas production.”Meanwhile in May 2020, in the midst of the pandemic and in a context of wreckages in the oil and gas markets, Moody’s had put a negative outlook to T&T’s credit rating.This was mainly based on COVID-related fiscal slippages.

Recently, Moody’s announced that it downgraded T&T’s outlook.He explained that the IMF is concerned with the country’s external and internal (fiscal) balances and its obligations under the IMF Articles while Moody’s is concerned with the country’s external debt profile and its ability to meet its obligations to creditors over the medium and long term.“Moodys is clearly not assured and sees a weaker credit profile even with a rebound in growth over the next couple of years,” Farrell said.Further, Farrell emphasised T&T has to put “twice, three times as much effort, time and resources” into economic diversification as it does on the energy sector.

According to economist Dr Roger Hosein, the IMF’s growth projection for 2022 of 5.7 per cent is very welcome news.According to Hosein, a closer look at the data also indicated that the majority of the growth is coming from the energy sector.But he questioned whether this is the growth the country wants.He added that rising prices and a decline in nominal per capita GDP (comparing 2016 and 2022 only) are not a good combination.“Indeed, the IMF report also carefully points out that the central government primary balance remains in deficit and even more, the non-energy aspect of the primary balance widens: not good at all,” Hosein said.

T&T’s debt capacity
In the last six years the economy declined by 16.6 per cent and stacked up a fiscal deficit of over $61 billion,
according to economist Dr Vaalmikki Arjoon.According to Arjoon, T&T is now deemed even riskier by the global community for meeting its debt repayment obligations, having been further downgraded in the speculative grade category to Ba2 in the recent ratings exercise by Moody’s.Further, Arjoon said while the IMF has forecasted a growth of 5.7 per cent next year, T&T’s GDP will still be worse than where it was over 2006 to 2019.“A key downside risk is the continuing global supply chain issues and shipping costs that continue to drive up costs in the private sector. The US is our largest trading partner, and is currently facing a 6.7 per cent inflation rate – the highest in the last thirty years,” Arjoon also noted.

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