FY2023/2024 Budget Highlights
Commentary
Estimates of Revenue & Expenditure for 2023/2024
- Oil Price Assumption: USD 85.00/Barrel
- Gas Price Assumption: USD 5.00/MMBtu
- Total Revenue: TT 54.012 Bn
- Oil: TT 16.709 Bn
- Non-Oil: TT 35.547 Bn
- Capital: TT 1.756 Bn
- Total Expenditure: TT 59.209 Bn
- Fiscal Deficit: TT 5.197 Bn (2.7% of GDP)
Major Fiscal Allocations for FY2024 (TTD billion)
- Education and Training $8.022Bn
- Health $7.409Bn
- National Security $6.912Bn
- Works and Transport $3.394Bn
- Public Utilities $3.018Bn
- Rural Development and Local Government $1.825Bn
- Agriculture $1.442Bn
- Housing $1.165Bn
- Social Development $5.500Bn
Economic Updates
Steady Economic Growth: The domestic economy grew by 1.5% in 2022. In the first quarter of 2023, growth increased to 3%, led by a buoyant non-energy sector. The economic recovery is expected to continue, estimating a growth rate of 2.7% in 2023 and similar rates in 2024 and 2025. Both energy and non-energy sectors are now driving balanced growth, with the non-energy sector projected to expand by 2.6% in 2024 and 2% in 2025.
Unemployment Rate Improves: Unemployment rate dropped from 4.9% (January to March 2023) to 3.7% (April to June 2023) based on CSO’s latest data, indicating a positive trend in employment.
Decreasing Inflation Trend: After peaking at 8.7% year-on-year in December 2022, headline inflation significantly decreased to 4.0% in August 2023. This reduction was driven by softer pricing in both food and core components of the All Items Retail Price Index (RPI). Lower shipping costs, eased transportation bottlenecks, and reduced international food commodity prices contributed to the alleviation of input price pressures.
Fiscal Turnaround: Following a record 9.1% of GDP fiscal deficit during the pandemic in FY 2020, fiscal consolidation efforts resulted in a 0.6% GDP surplus in FY 2022. The estimated deficit for FY 2023 is expected to be less than 1.8% of GDP.
General Government Debt Increase: Adjusted General Government Debt is expected to rise to $137,209.6 million by the end of FY 2023. As a percentage of GDP, Adjusted General Government Debt will increase by 4.3 percentage points to 70.9%, up from 66.6% at the end of FY 2022. Central Government Domestic Debt, representing 51.3% of Adjusted General Government Debt, is projected to increase by 6.4% from $66,201.8 million in fiscal 2022 to $70,433.5 million in fiscal 2023, reaching 36.4% of GDP by the end of fiscal 2023.
Improved External Sector: Trinidad and Tobago’s Balance of Payments showed a reduced deficit of USD47.8 Mn in the first quarter of 2023, compared to a USD227.6 Mn deficit in the same period the previous year. This improvement was attributed to reduced outflows from the Financial Account and modest growth in the Current Account balance. As of September 22, 2023, gross official reserves reached USD6,358.6 million, providing 8.0 months of import cover.
Heritage and Stabilisation Fund Growth: The HSF’s Net Asset Value (NAV) increased by USD781.9 Mn, reaching USD5.5 Bn by September 15, 2023, from USD4.7 Bn at the end of FY2022, driven by positive investment returns and a USD182.2 Mn deposit in December 2022.
Favorable Investment Climate: Moody’s improved the outlook for Trinidad and Tobago’s rating to positive, affirming it at ‘Ba2’ in July 2023. S&P maintained the ratings of ‘BBB-’ with a stable outlook. In November 2022, CariCRIS reaffirmed a ‘CariAA’ rating with a stable outlook.
Proposed Fiscal and Other Measures (all measures w.e.f. 1 January 2024 unless stated otherwise)
- Minimum Wage Increase: An increase in the minimum wage by 17%, or $3.00/hr, from $17.50 to $20.50. This measure is expected to benefit approximately 190,000 persons in the workforce.
- Tourism Accommodation Upgrade Project: An extension of the Tourism Accommodation Upgrade Project (TAUP) incentive by three (3) years, which is due to expire on September 30, 2023. This facility provides a reimbursable grant to eligible tourism accommodation facilities. This measure will be reinstated from November 1, 2023 for another three (3) years.
- Export Sales of Manufacturing Companies: Business Levy Charge: Business Levy exemption for manufacturing companies whose gross receipts fall within the 30% tax bracket from business levy charges regarding only export sales. This measure aims to create a competitive advantage for local manufacturing businesses to engage in local sales. This initiative will result in an estimated tax loss of $20 Mn annually.
- Energy Sector Incentives: Supplemental Petroleum Tax: The Sustainability Incentive for supplemental petroleum tax has been raised from 20% to 25% for mature marine and small marine oil fields, encouraging increased production. Additionally, adjustments have been introduced in the shallow water areas, setting a new threshold of $75 per barrel of supplemental petroleum tax for small shallow water producers, promoting further production incentives.
- Cybersecurity Investment Tax Allowance: A new Cybersecurity Investment Tax Allowance, offering up to $500,000, has been introduced for companies investing in cybersecurity software and network security monitoring equipment. This initiative aims to mitigate the rising threat of cyber-attacks.
- Exempt Income: Expenditure Earned: Amendment to the tax legislation to address legislative ambiguity with respect to the treatment of expenditures claimed against exempt income issue by disallowing expenditures incurred in earning exempt income, subject to specific provisions of the tax law stating otherwise. This initiative will protect the tax base in Trinidad & Tobago, harmonize the law, and bring us into alignment with standard practice in jurisdictions worldwide. This measure is expected to yield approximately $75 Mn in tax savings
- Corporate Sponsorship Incentive for Public and Private Schools: A 150% tax allowance, capped at $500,000, has been introduced for corporate sponsorship to public and private schools registered with the Ministry of Education, aiming to promote education access and quality by encouraging school enhancements.
- $1 Billion Back Pay Disbursement: Back pay totalling $1 billion will be distributed to 37,000 public-sector workers who accepted the government’s 4% wage increase offer, ensuring payments are made before Christmas.
- Property Tax Implementation in 2024: The collection of property tax is scheduled to commence in 2024.
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