ST. AUGUSTINE, TRINIDAD AND TOBAGO— World Trade Organization and Investment banks are listening to Trinidad and Tobago’s 2020-21 budget because it includes a rebirth of agriculture. A sector once ripe with diversity and potential began decreasing as oil revenues increased. Over-dependence on oil revenues that are no longer a cash cow, slowed economic fortunes. Making kick-startingT&T economies a herculean task, according to Dr. Preeya Mohan, University West Indies (UWI) Economist.
In beginning the road to recovery, there are some key economic questions readers of the budget should address.
Trinidad and Tobago’s Budget 2020-21 Manufacturing
Opportunity cost attributed to declined manufacturing increases the trade deficit. With Cuba and Venezuela as examples of nominalized or marginalized manufacturing, how firm is Trinidad and Tobago’s Manufacturing Sector that it exceeds its benefits from a foreign exchange perspective, and is that liable to change in the next decade.
Consumption=Imports + Domestic Production
Both imports and manufacturing utilize foreign reserves. Domestic production, manufacturing and agriculture, is most likely to supplement long-run foreign reserves investment targets. Benefits from long-run perspective include: skills transfer, positive net investment from a capital perspective, and increase Gross Domestic Production (GDP).
Unlike Imports manufacturing foreign reserve change effects are marginal compared to the dollar for dollar reduction associated with imports.
Trinidad and Tobago’s Budget projections Real vs. Nominal
Are economically declining forecasts real or just nominal.
There is a limit on comparable market data to adjust nominal production and consumption numbers in a real context because significant technology advances generated a substantially different economy from 10 years ago. Consider the net effect of staples in the modern economy like internet access and mobile phones. While a number of sectors of Trinidad and Tobago’s economy are producing less, there is undoubtedly a larger economy than two to three decades ago.
Trinidad and Tobago’s Budget 2020-21 Debt to GDP
As a financial economist I favor financing over taxing. Debt eventually remits itself to equity at some point in the equation.
Why are policy advisors adverse to financing considering monies inevitably produce a marketable asset, absent financing for perishable consumption that do not exhibit high margins…
Fellow UWI Economist, Dr. Dave Seerattan, sees a strong healthy CARICOM financial system based on recent Central Bank stress tests.
The facts are simple.
Borrow $5 million for construction. Upon completion, there is now a cost-based asset worth $5 million and a market-adjusted asset the lender can claim investment rights in that exceeds the principal. Creating another avenue to leverage more future financing. Net effect on GDP is positive. Borrowing increases and GDP also increases.
The productivity and value market adjustments to capital investments depend on both suitability of the decisions and sustainability of growth projections the new development offers consumers.
Increasing debt is not the preferred method of financing because negative stereotypes associated with high debt to GDP models are unsustainable. New tight fit growth models in CARICOM markets have holistic agendas incorporating exotic financing options that eliminate scarcity from equations in a positive decision making process that carries with it greater emphasis on new growth and less weight on cost of production because automation is possible. Making the next economic platform more appealing.
Trinidad and Tobago’s Budget 2020-21 Revenue
If local market dynamics mirror changes in global markets as they transition to finance products, and as automation reduces labor and manufacturing costs, will revenue numbers inevitably adjust upwards?
The 2020-21 Budget revenue estimates $28 billion in tax revenue and $11 billion in non tax revenue. Slightly under the $40 billion dollar mark. Which is down from the $44. billion 2019 budget figure. Non tax revenue primarily, Property Revenues, are approximately 25 percent of the budget.
Proliferating widespread economic increases from a fiscal policy perspective requires a comprehensive incentive-based agenda. The possibility of no revenue is unlikely. The greater the population the higher production elevates.
Effectuating higher revenue numbers results from an increase in one or more factors of production. CARICOM, post Covid economic strategies, eliciting factors of production effectively such as labor, incentives, technology, energy and financing capital leave room for larger revenue forecasts in future budgets.
Market participants both consumer and provider can attest positively and confidently to that agenda prospectively.
Consider global markets food distribution methods and the effect on domestic CARICOM economies realizing economies of scale adapt slower. Placing the production regime focus ahead of consumption schedules can overcome and eliminate any missing or extra steps. Providing the right policy incentives motivates individuals and maximizes sustainable growth.
Trinidad and Tobago’s Budget 2020-21 Equity Markets
Is initiation of Trinidad and Tobago Securities Exchange Commission (TT SEC) and opportunities for equity market development in Trinidad and Tobago from an internal perspective and enhancement of the modern financial sector provide new opportunities for revenue increases making Mr. Imbert’s estimates reasonable..
Revenue revolves around market activity, greater production carries a higher revenue target. TT SEC provides development companies greater access to capital a guaranteed generator of market activity. The prime avenue for kick-starting any economy.
From a fiscal conservative perspective, more revenues are realized from increased production. Providing more confidence individuals expect from a strong central government able to actively reinvigorate all economic sectors with minimal friction. Increased rates are less effective revenue stabilizers of economic agendas across global and regional stratospheres.
These are some of the observable benefits, from perspective that economist consider in policy implementation and economic development. The actual distinction between the breadth and width of an Economic Benefit plan fiscal policy is perspective. Macro economic indicators require new tight fit growth models in their agenda as these implementation regimes progress.