Jun 2015 Financial News

Moody’s increases T&T’s fiscal rating

Jun 08, 2015

Moody’s Investors’ Services, which recently downgraded T&T’s rating, has increased the country’s fiscal strength rating from high to very high, Finance Minister Larry Howai announced yesterday.

Speaking in Parliament on a variation motion concerning the 2015 Appropriation Bill, where funding will be shifted from some ministries to fund matters in others, Howai said T&T’s macroeconomic indicators remain strong with investors’ confidence unchanged internationally despite the recent downgrade.

“This is best measured by the price of our benchmark bonds which have remained stable and even tightened somewhat since the adjustment in our rating. It is also worthwhile to note that Moody’s rates countries using four quadrants—economic strength, institutional strength, fiscal strength and susceptibility to event risk—and in the area of fiscal strength, our rating was increased by Moody’s from high to very high.

“Conditions remain in place for stable economic performance in 2015. Inflation remains tame at 6.7 per cent, there is reduced fiscal drag, strengthened balance sheets in our financial sector and an improving housing and construction market which is expected to build momentum in the last quarter of the fiscal year 2015 and into 2016.”

Howai said Government’s projection for gross domestic product (GDP) at the end of this year is that the total would have grown to approximately $190 billion.

“While the longer term prospects for our energy sector continues to improve, the short term results have not been as buoyant with output in the gas sector contracting by close to 4.5 per cent which has resulted in a contraction in the overall sector by 3.3 per cent. This contraction was counterbalanced by growth in the non-energy sector, we expect this momentum to continue in 2015.”

Howai said other macroeconomic indicators continue to perform exceptionally well, including an unemployment rate of 3.3 per cent and headline inflation continuing to trend downward.

He said consumer spending is up and “it is an area that we continue to monitor closely . . . I’m advised that motor vehicle sales were up 25 per cent and sales of cement, an indication of construction activity, continued to increase robustly towards the end of last year.”

The minister said T&T’s balance of payments “continue to be healthy registering a surplus of US$47.2 million after the first six months of the fiscal year. This position is expected to deteriorate in the last half as a result of the momentum of capital expenditure but the deficit is projected to come in below initial projections. 

“Gross international reserves have climbed to over US$10.7 billion, equivalent to approximately 12 months import cover at the end of March 2015.”

Howai said foreign currency deposits in the banking sector have grown to over US$3.5 billion. 

“The Heritage and Stabilisation Fund remains at over US$5.6 billion. Standard and Poor’s have continued to maintain their rating for the country and our overall debt profile remains stable with total debt, including guarantees, amounting to 41.3 per cent of GDP as at December 2014. Foreign direct investment remains strong with the Mitsubishi Massy plant expected to commence in early 2016 and well development continuing on the BP’s US$2 billion platform.”

On whether T&T “is out of the woods yet” Howai noted that global economic growth has been tepid and uneven and in T&T while unemployment remains low, underemployment is a major challenge.

“While progress has been made in the management of our fiscal accounts, much work still needs to be done in streamlining expenditure and improving revenues to ensure sustainability over the longer term,” he said.

Source:
Gail Alexander
Trinidad Guardian
Saturday June 6, 2015

http://www.guardian.co.tt/business/2015-06-06/moody%E2%80%99s-increases-tt%E2%80%99s-fiscal-rating