Economy forecast to continue slow but steady growth in coming years
Releasing government’s 2016-2017 strategic policy statement, an annual exercise to set spending priorities, the premier and finance minister said the budget includes no new taxes or fees. Releasing the plan, the premier said his government does not plan on taking on any new debt and will continue to pay off bonds.
Finance Minister Marco Archer, presenting the policy statement on Wednesday, said government expects the economy to grow steadily over the next three years. As the economy grows, Mr. Archer said, so does government income.
“Government does not plan to introduce any major new revenue measures during the next three financial years,” the minister said. He continued, “Instead, we are focusing our efforts on improving the enforcement and rate of collection on the existing suite of revenue measures.”
The 2016-2017 year will be an 18-month fiscal year as government moves from a July 1 to June 30 fiscal year to budgeting on the calendar year. Because of the longer budget year, Mr. Archer forecast government operating expenses at about $850 million in the years to come, with revenue at about $896 million. Adjusting for the longer fiscal year, revenue is down about 10 percent over forecasts for the current year, while expenses are up by about $40 million.
“Economic growth will be directly influenced by several large construction projects from both the private and public sectors,” Mr. Archer said, including the new Kimpton and Beach Bay hotels, redevelopment of the airport and other projects.
Mr. Archer said with the forecasts for economic growth and higher employment levels could lead to inflation. He told legislators, “Controlling inflation is of particular concern and interest to the government as it impacts the lives of everyone by affecting the cost of doing business and the cost of living.”
He continued, “Given our Islands’ high dependence on imported goods we are particularly vulnerable to inflation caused by external factors. As a government, we will continue to exercise the interventions available to us to manage domestic inflation.”
Both Premier Alden McLaughlin and the finance minister said government’s budgeting was on target to meet requirements in the Public Management and Finance Law by the June 30, 2016 deadline. Speaking to the Legislative Assembly, Mr. McLaughlin said, “I am especially pleased that all of this has been achieved without the need to impose any new taxes on our people or businesses and without the need for any new borrowing.”
Mr. Archer said the new Strategic Policy Statement met with “unconditional agreement” from the United Kingdom’s Foreign and Commonwealth Office under the Framework for Fiscal Responsibility. He said, “The short time frame within which we have received such agreement is a real testament to the quality of our forecasts and the increased levels of confidence that the United Kingdom has in our ability to deliver on our promises of financial reform.”
This is the first year, the minister said, that the government has been compliant with the framework since it became effective in November 2012. “The importance of this achievement cannot be overstated. It did not come easily and is the direct result of this government’s focused policy of practicing fiscal prudence and ensuring that we take the time necessary to follow the established business processes.”
He said the three-year strategic plan will likely be in line with the Framework for Fiscal Responsibility except in 2019, when Mr. Archer said government will pay off a US$312 million bond originally secured in 2009 to help the government get through the global financial crisis. Mr. McLaughlin said this will be a “technical breach” of the framework but he said government will work with U.K. officials to make sure it’s not seen as an actual violation of fiscal rules.