Trinidad and Tobago
major macro economic indicators
|2013||2014||2015||2016 (f)||2017 (f)|
|GDP growth (%)||2.2||-1.0||-2.1||-2.7||0.8|
|Inflation (yearly average) (%)||5.2||5.6||4.6||4.7||5.3|
|Budget balance (% GDP)*||-2.0||-4.0||-6.9||-11.3||-16.3|
|Current account balance (% GDP)||7.2||4.6||5.3||-8.6||-7.1|
|Public debt (% GDP)||41.0||40.0||44.2||48.3||58.8|
(e) Estimate (f) Forecast
- World’s fifth largest producer of liquefied natural gas (LNG)
- Petrochemical industry (world’s leading exporter of methanol and ammonia)
- Large sovereign funds and currency reserves
- Lead country in CARICOM, the Caribbean community
- Well trained and English-speaking workforce
- Small economy and reliant on oil and gas
- Undeveloped non-energy sector (including agriculture and tourism)
- Projected decline in energy resources
- Ineffective public initiatives
- Inadequate supervision of financial sector
- Inequitable distribution of wealth, drug traffic related criminality
Slow recovery in activity in 2017
Since 2014, low oil and gas prices, together with the depletion of a number of gas and oil fields, as well as chronic operational underinvestment, have all contributed to the slowdown in activity in Trinity and Tobago. This is for the most part based on the energy sector (oil, gas and petrochemicals) which accounts for almost 35% of GDP and over 90% of exports. Local natural gas production is also used to generate the country’s electricity. Activity in 2017 is likely to be driven by increased gas production thanks to the drilling of new gas wells and the rise, slow as it may be, in oil prices. Domestic demand, however, is likely to remain relatively weak. The continuation by the Prime Minister of his budget consolidation policy is likely to impact in particular on public investment spending. Private investment in the non-energy sector will depend on the ability of the government to create a more favourable legal context for companies, whilst that for the energy sector is likely to contract. Household consumption is expected to remain flat because of rising unemployment. Finally, inflation is likely to stay within the average for recent years (around 5%), but will remain subject to supply factors, in particular the volatility of food product prices.
A continuing public deficit, despite the budget consolidation program
The deterioration of Trinidad and Tobago’s budget deficit is set to continue in 2017. The use of exceptional measures by the government (sales of overseas assets, partial sale of State companies) aimed at offsetting the decline in oil and gas revenues, has not been enough to stop the slide in the budget recorded in 2016. Fixed expenditure items (civil service wages and remuneration, transfers and subsidies required by law) account for more than 60% of spending and restrict potential adjustments to the State budget. The government has however announced the introduction of a series of tax reforms aimed at increasing State revenues (raising corporate tax from 25% to 30%, increasing taxes on alcoholic drinks and tobacco, reducing the subsidy on diesel, etc.), but does not seem to have a strategic medium-term budget framework. The budgetary adjustment planned by the government will thus make it possible to maintain spending at the levels of recent years but will not be enough to reverse the downwards trajectory of the public accounts and thus the increasing level of public debt.
Persistent current account deficit
In terms of foreign trade, the current account balance is expected to be in deficit in 2017 for the third year in a row. The slight upturn in oil and gas prices and the expected boost to production will however help reduce the balance of trade deficit. The deficit in the income balance should also contribute to improving the current account balance thanks to a reduction in the transfers of profits by foreign-owned companies operating in the energy sector. The reduced level of tourist revenues, suffering because of the recession in Venezuela which is the source of a significant proportion of the visitors mainly because of its geographic closeness, will continue to impact on the balance of services. FDI, concentrated in the energy sector, are likely to decline. Finally, if the expected rise in energy prices is delayed, the central bank will be forced to allow the Trinidadian dollar (TT$) to fall against the US dollar given the country’s limited currency reserves.
Looking for other ways to boost growth
In power since September 2015, the Prime Minister, Keith Rowley of the People’s National Movement (PNM) party, is expected to continue with the process of consolidating the public finances despite his waning popularity. With a majority in Parliament (23 out of 41 seats) and aware of the very limited scale of economic diversification, the government has set itself the objective of enhancing the local productive fabric by attracting in more investment in the energy (petrochemicals in particular) and non-energy (tourism, agri-food, finance, etc.) sectors. This includes the creation of a favourable legal context for the development of public-private partnerships aimed at increasing the quality of the country’s infrastructures. Trinidad and Tobago also has a continued active role to play within the Caribbean Community (CARICOM) and cooperative initiatives in combating criminality and drug trafficking in partnership mainly with the United Kingdom and the United States.
Last update: January 2017