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Banker: Deficit decline is good news

Published: 
Monday, May 14, 2018

Managing director, Republic Bank Ltd (RBL) Nigel Baptiste said the projected decline in T&T’s fiscal deficit is good news for the economy. He said persistent fiscal deficits tend to exert upward pressure on public debt because government is required to borrow to finance the deficit.

“A growing debt stock can be a major challenge for a country, since at unsustainable levels, debt can suppress growth by consuming resources that could otherwise be invested. It is my hope that the fiscal account is brought into balance over the next few years as previously announced by the government,” he said

In his mid year budget review, Finance Minister Colm Imbert said as a result of revenue and expenditure adjustments the overall deficit for financial year 2018 is being projected at approximately $4.2 billion or more than $500 million lower than the original financial year 2018 budgeted amount of $4.76 billion.

Baptiste said the fact the taxes to the wider business community did not increase is another positive sign as “it sends the signal that government is confident that it’s expected revenue flows are expected to be closer in line with what it’s projected expenditure is likely to reach.”

He added: “It also suggests some appreciation by the government that there is a limit to which taxes can be applied without affecting investment, consumption and ultimately GDP growth. Given these signals, businesses may feel more encouraged to invest.”

Commenting on T&T’s import cover of nine months, Baptiste said foreign exchange reserves provide more than adequate cushion for the domestic economy.

Asked whether he thinks T&T is in an economic recovery, Baptiste said there is evidence to support that claim since demand for credit was “fairly healthy” during the last quarter of 2017.

“Commercial banks’ loans to the private sector increased by 5.5 per cent above the level recorded in the same period in 2016. Similarly, there were expansions in consumer loans and mortgage loans of six per cent and eight per cent year on year, respectively during the fourth quarter,” he said.

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