This 2004 Article IV Consultation highlights that Trinidad and Tobago’s economy, which is endowed with large energy reserves, is experiencing a strong energy sector-based expansion owing to increased output and high international prices. The energy sector already accounts for about 40 percent of GDP, 83 percent of domestic goods exports, and slightly more than 40 percent of government revenue. The balance of payments recorded an increased surplus in 2003, despite large capital outflows, reflecting the strong performance of the energy sector.

Abstract

This 2004 Article IV Consultation highlights that Trinidad and Tobago’s economy, which is endowed with large energy reserves, is experiencing a strong energy sector-based expansion owing to increased output and high international prices. The energy sector already accounts for about 40 percent of GDP, 83 percent of domestic goods exports, and slightly more than 40 percent of government revenue. The balance of payments recorded an increased surplus in 2003, despite large capital outflows, reflecting the strong performance of the energy sector.

1. This statement provides an update on fiscal developments since the issuance of the staff report for the 2004 Article IV consultation with Trinidad and Tobago. This additional information does not affect the thrust of the staff appraisal.

Fiscal outturn in FY 2003/04

2. The overall budget surplus amounted to 2.2 percent of GDP, 0.8 percentage points of GDP lower than estimated by the mission. While the current fiscal balance was in line with the estimate, implementation of the public sector investment program in the last quarter of the fiscal year exceeded the projected rate.

Budget proposal for FY 2004/05

3. The budget proposal for FY 2004/051 was submitted to parliament on Friday, October 8. As anticipated in the staff report, the budget proposal has been drafted using a conservative oil price assumption. The budget is based on a crude oil price of US$32 per barrel, substantially below current levels and lower than the price of US$37 per barrel used in the staff report projections for FY 2004/05. Under this conservative assumption, the government targets an overall budget surplus of 1.6 percent of GDP, compared with a projected surplus of 3.3 percent of GDP in the staff report. If the budget proposal is adjusted to use the same oil price assumption as in the staff report, it would imply a budget surplus of 2.6 percent of GDP—about ½ percent of GDP lower than projected in the staff report. The shortfall would arise in the current fiscal balance, and is attributable partly to a higher wage bill, on account of allocations for vacant positions. However, the budget surplus would rise to 4.0 percent of GDP if adjusted to the current oil price outlook.

Table 1.

Trinidad and Tobago: Central Government Operations

(In percent of GDP, unless indicated otherwise)

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Sources: Ministry of Finance; and Fund staff’ estimates and projections.

Based on the same oil price assumption as in the staff report.

Based on the current WEO crude oil price projection.

1

October-September fiscal year.

Trinidad and Tobago: 2004 Article IV Consultation—Staff Report; Staff Statement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Trinidad and Tobago
Author: International Monetary Fund