Economic Review

Source: Ministry of Finance, Central Bank of Trinidad & Tobago

The fiscal year 2023 was characterized by uncertainty, brought about by the lingering effects of the COVID-19 pandemic, high inflation and tightening access to foreign currency, however the local economy was buoyed by a resurgence in energy prices. The Central Bank of Trinidad and Tobago (CBTT) continued to provide monetary policy support to the domestic economy, keeping the reference interest rate, the Repo rate, at 3.50%, since the reduction from 5.0% in March 2020 in response to the COVID-19 pandemic. Domestically, the recovery of economic activity is gradually taking shape which can be noted from several macroeconomic indicators below:

Economic growth: Economic activity rebounded in Trinidad and Tobago after contracting by 1% in 2021, the domestic economy grew by 1.5% in 2022. Further, growth continued in the first quarter of 2023 at a rate of 3%. Significantly, from a diversification perspective, economic growth was driven by a buoyant non-energy sector, which expanded by 5.8% in 2022.

Inflation: Inflation decreased from its high of 8.3% in January 2023 to 6.2% in August 2023.

Unemployment: Unemployment decreased to 3.7% as of June 2023, down from the 4.5% recorded a year earlier and down from the 4.7% recorded at the end of December 2022.

Reserves: Gross official reserves stand at US$6.8 billion or 8.6 months of import cover, above the benchmark 3- month coverage.

Heritage and Stabilisation Fund: Currently US$5.5 billion, up from the US$5.1 billion a year ago.

Credit Profile: On July 2023, Standard & Poor’s reaffirmed the country’s credit rating at BBB- and Stable outlook. Additionally, Moody’s Investors Services has affirmed the Ba2 rating of Trinidad and Tobago but moved Trinidad and Tobago’s outlook upwards from Stable to Positive.

Trinidad and Tobago Budget 2024: Building Capacity for Diversification and Growth

The Trinidad and Tobago 2024 budget, presented by Finance Minister Colm Imbert on October 2, 2023, is a bold and ambitious plan to invest in the country's future. With a focus on diversification, growth, and social justice, the budget aims to create jobs, improve infrastructure, and support the most vulnerable members of society. The budget was based on the following assumptions:

• Global economic growth of 3% in 2024
• Oil prices of US$75 per barrel in 2024
• Natural gas prices of US$5.00 per MMBTU in 2024

Here are some of the key highlights of the 2024 budget:

Total Revenue $ 54.012 billion, sourced from:

• Oil revenue $ 16.709 billion
• Non-oil revenue $ 35.547 billion
• Capital revenue $ 1.756 billion

• Total Expenditure $ 59.209 billion
• Fiscal Deficit $ 5.197 billion (2.7% of GDP)

The major Fiscal allocations for 2024 are as follows:

One of the most notable aspects of the budget is its focus on diversification. For too long, the Trinidad and Tobago economy has been heavily reliant on the oil and gas sector. This has made the country vulnerable to fluctuations in global energy prices. The 2024 budget seeks to address this by investing in new industries and sectors, such as tourism, manufacturing, and renewable energy, such as solar and wind farms. This will help to reduce the country's reliance on fossil fuels and create new jobs in the clean energy sector. The budget also included several other measures to promote growth. For example, the Government is seeking to reduce corporate taxes and invest in infrastructure, such as roads, bridges, and ports. The Government is also aiming to provide support to small and medium-sized enterprises, which are the backbone of the Trinidad and Tobago economy.

Major highlights of the 2024 budget included:

• Investment in diversification: The Government is investing in industries and sectors outside of oil and gas, such as tourism, manufacturing, and renewable energy.
• Promoting growth: The Government is reducing corporate taxes, investing in infrastructure, and providing support to small and medium-sized enterprises.
• Supporting social justice:

1. The Government is increasing the minimum wage, providing additional funding for education and healthcare, and expanding social safety net programs.
2. The Minister proposed an increase in the minimum wage of $3.00 per hour, from $17.50 to $20.50 per hour. This measure represents a 17% increase and is expected to benefit approximately 190,000 persons in the workforce. The measure is expected to take effect from January 01st , 2024.
3. The provision of $1,000 school supplies and book grants to needy students. This will help to ensure that all students have the resources they need to succeed in school.
4. The Government is increasing funding for the Chronic Disease Assistance Programme (CDAP) by $100 million. This will help to provide affordable healthcare to people with chronic diseases.

• Property Tax: Collection is anticipated to start in 2024 with residential properties. Industrial and commercial properties will come after.
• Backpay: $1.0 billion in backpay for those 37,000 public sector workers who have accepted the Government’s offer of a 4 percent increase, by Christmas.

Biggest gains for Companies:

SME forex facility: Strategies to assist SMEs to gain improved access to forex will be implemented in fiscal 2024. Additionally, the Government is to implement strategies to increase the repatriation of foreign exchange earned overseas by local and foreign businesses operating in Trinidad and Tobago.

Exemption from Business Levy on Export Sales: Exempting manufacturing enterprises with income falling within the 30% tax rate from the Business Levy. This change will become operative on January 1ST, 2024.

Cybersecurity Investment Tax Allowance: Introduction of a tax deduction of up to $500,000 for businesses that spend money on investments in cybersecurity software and network security monitoring equipment in order to encourage businesses to invest in cybersecurity and reduce the risk of cyber-attacks within the digital economy. The expense must be approved by iGovTT in order to be eligible for this reimbursement. The duration of this regulation is from January 01st , 2024 to December 31st , 2025.

Petroleum Profits Tax: With effect from January 01st , 2024, lowering the petroleum profits tax for deep-water exploration from 35% to 30%. This policy is designed to persuade businesses to invest in deep-water exploration, which will ultimately lead to higher production levels. Deep sea exploration incentives may be useful in this process. Due to its high risk and capital-intensive nature, deep sea exploration generally seems less appealing. The drop in the petroleum profits tax from 35% to 30% will encourage foreign investors.

Public and Private Schools: Corporate Sponsorship: 150 percent tax allowance of up to $500,000 on corporate sponsorship to public and private schools registered with the Ministry of Education. This measure will take effect on January 01ST, 2024.

Tourism Accommodation Upgrade Project: A 3 year extension of the Tourism Accommodation Upgrade Project (TAUP) incentive, which was due to expire on September 30th , 2023.

Overall, the Trinidad and Tobago Budget 2024 is a budget that aims to build capacity for diversification and growth. The Government is investing in key sectors and initiatives in order to create jobs, improve the quality of life for citizens, and make the economy more resilient to shocks. Let us know how the 2024 Budget has affected you personally. Contact your Guardian Asset Management and Investment Services Limited Investment Advisor or Wealth Manager today at 226-2799, so together we can build your future wealth and achieve your financial goals faster.

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