International credit rating agency is pointing to a sharp improvement in Trinidad and Tobago public finances in 2022, causing the country’s fiscal deficit to narrow markedly between 2021 and 2022.

Fitch is predicting that the fiscal deficit will remain relatively modest in 2023. However, the forecast is for the shortfall to decrease from 8.7 per cent of GDP in 2021 to 2.3 per cent in 2022, before coming in only slightly wider at 3.1 per cent in 2023.

The ratings agency notes that there has already been a sharp swing in the fiscal position since the beginning of 2022. During the first half of 2022, the fiscal balance came in at a surplus of TTD2.36 billion – the equivalent of around 2.8 per cent of GDP on an annualized basis.

T&T UNLIKELY TO RECORD BUDGET SURPLUS

This compares to a deficit of TTD6.16 billion (8.5% of GDP) in H1 2021. The turnaround has been driven by a sharp pick-up in revenue, which (on an annualized basis) has risen from 23.4 per cent to 31.1 per cent of Gross Domestic Product (GDP) between the first half of 2021 and the similar period of 2022, representing a 57.6 per cent rise in nominal terms.

The improvement in revenue performance has been driven by higher global prices of oil and gas, as well as a jump in natural gas production. However, with energy prices easing in the second half of 2022, T&T is unlikely to record a budget surplus over the year as a whole.

FITCH PROJECTION

Nonetheless, Fitch’s projection for a budget deficit of 2.3 per cent of GDP in 2022 represents a substantial improvement on the 2021 outturn of 8.8 per cent. This would mark the smallest fiscal deficit recorded since 2013 and is well below the average shortfall of 6.8 per cent of GDP experienced over the past decade.

Importantly, based on these fiscal forecasts, government debt will ease from 75.1 per cent of GDP in 2021 to 74.4 per cent of GDP in 2022. The ratio is then expected to remain at a similar level in the subsequent years as the authorities continue to rein in expenditure.