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Snapshots of the economy: Part 1
It’s the official countdown to October 2, when the 2017/2018 national budget will be presented.
In this week’s edition of Business and Money, we begin a two-part series looking at the state of T&T’s economy based on statistics obtained from the Central Bank of T&T.
As an oil and gas-based economy, T&T has suffered the economic fallout associated with the commodity price decline that began in 2014.
Between 2014 and 2015 government’s revenue hovered around $55.7 billion.
Comparing 2016 to 2014, however, central government revenue declined by 25 per cent.
West Texas Intermediate crude prices in 2014 averaged around US$93.10 per barrel, but in 2015 the price declined to US $48.70—a 48 per cent decline.
The WTI price declined even further in 2016 to $43.20 representing a 53 per cent decline from its 2014 figure.
On the gas side, Henry Hub gas prices in 2014 averaged US $4.40, but began to fall in 2015 ending at an average of US $2.60.
In 2016, gas prices dipped slightly to around US $2.50.
Finance Minister Colm Imbert in his presentation of the 2016/2017 budget, explaining the impact of falling commodity prices said, “while the underlying reason has been the natural reduction in the rate of extraction from maturing oil and gas fields and maintenance and upgrade work in particular on our gas installations, the low prices over the last 18 months have eroded profit margins and led to a cutback in output of many small independent producers.”
Closer examination off the government’s energy revenue reveals that in 2014 it stood at $27.9 billion, but there was a drastic drop in 2015 of 48 per cent to end the year at roughly $14.5 billion.
When compared to 2014, there was an even further decline of 78.5 per cent in 2016 when energy revenue totalled $6.4 billion.
The energy sector is a significant contributor to GDP and when revenue from the sector started to decline so too did GDP.
Real GDP growth collapsed from 2.7 per cent in 2013 to -0.6 per cent in 2014 and held that position throughout 2015.
In 2016, real GDP growth declined by a further to -2.3 per cent.
Revenue from energy sector earnings is generated in US currency, and when energy revenue declined, the issue of a decline in US dollars in the T&T market grew more pronounced.
In 2014, T&T’s net official reserves stood at US $11.5 billion but in 2015 this declined to US$9.9 billion and in 2016, US $9.5 billion.
In July 2016, the TT-dollar depreciated by five per cent, Imbert said in his presentation of the budget for 2016/2017.
Up to July of this year, net official reserves has declined further, currently standing at US$ 8.74 billion.