Trinidad & Tobago

The double-edged sword of being the Caribbean’s largest energy producer

B3

SENSITIVE RISK for entreprise

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financing risk

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GDP USD 20.9896bn (World ranking 104, World Bank 2016)
Population 1.37mn (World ranking 152, World Bank 2016)
Form of state Parliamentory Republic
Head of government Prime Minister Keith ROWLEY
Next elections 2020, general
  • Large oil and gas resources and largest petroleum and gas producer in the Caribbean
  • Strong external liquidity
  • Counter cyclical buffer in the form of Sovereign Wealth Fund (HSF)
  • High crime rate driven by drug and arms trafficking
  • Significant risks coming from the high dependence on energy revenues
  • Maintenance-related outages in the energy sector
  • Deteriorating fiscal position
  • Recurring foreign exchange shortages and growing external imbalances

A difficult but gradual return to growth

Real GDP growth in Trinidad & Tobago has been negative since 2014 strained by a contraction in the energy sector amid low oil prices. However we forecast growth finally turning positive in 2018 at +1.9%, and reaching +2.2% in 2019. This is in line with the recovery of the region, which is projected to firm, and the acceleration of the US economy (Trinidad’s main trade partner).

Despite a more constructive outlook, recent developments have seen the public debt-to-GDP ratio soar. By 2019 it is estimated to have doubled its 2015 level of 28.9%, reaching 60.4%. Indeed in 2016 the fiscal deficit rose to close to -13% of GDP. We expect it to remain elevated, adding more pressure on public debt. The IMF reports that energy-related revenues in 2016 declined by 7% of GDP y/y, driven by falling energy prices, volumes, and reduced incentives. Importantly, public debt jumped despite the fact that Trinidad’s government benefitted from ‘one off’ sources of financing totalling 7.2% of GDP. These included super dividends from the National Gas Company, asset sales and drawdowns from the national stabilization fund (HSF). Price pressures remain well contained, and we expect inflation to stabilize just above 3% in 2017 and 2018.

A difficult but gradual return to growth

Real GDP growth in Trinidad & Tobago has been negative since 2014 strained by a contraction in the energy sector amid low oil prices. However we forecast growth finally turning positive in 2018 at +1.9%, and reaching +2.2% in 2019. This is in line with the recovery of the region, which is projected to firm, and the acceleration of the US economy (Trinidad’s main trade partner).

Despite a more constructive outlook, recent developments have seen the public debt-to-GDP ratio soar. By 2019 it is estimated to have doubled its 2015 level of 28.9%, reaching 60.4%. Indeed in 2016 the fiscal deficit rose to close to -13% of GDP. We expect it to remain elevated, adding more pressure on public debt. The IMF reports that energy-related revenues in 2016 declined by 7% of GDP y/y, driven by falling energy prices, volumes, and reduced incentives. Importantly, public debt jumped despite the fact that Trinidad’s government benefitted from ‘one off’ sources of financing totalling 7.2% of GDP. These included super dividends from the National Gas Company, asset sales and drawdowns from the national stabilization fund (HSF). Price pressures remain well contained, and we expect inflation to stabilize just above 3% in 2017 and 2018.

Trade structure by destination/origin

(% of total)

Exports Rank Imports
United States 38%
1
32% United States
Argentina 12%
2
15% Russia
Chile 3%
3
12% Gabon
Peru 3%
4
6% China
Jamaica 3%
5
4% Colombia

Trade structure by product

(% of total)

Exports Rank Imports
Gas, natural and manufactured 27%
1
37% Petroleum, petroleum products and related materials
Petroleum, petroleum products and related materials 22%
2
6% Road vehicles
Inorganic chemicals 14%
3
5% Other industrial machinery and parts
Organic chemicals 14%
4
3% Specialised machinery
Iron and steel 8%
5
3% Other transport equipment

  • Low

  • Medium

  • Sensitive

  • High

  • Payments

  • Court proceedings

  • Insolvency proceedings

Contact

Contact Euler Hermes

Economic Research Team

research@eulerhermes.com

Contact Georges Dib

Economist for Latin America, Spain and Portugal

georges.dib@eulerhermes.com

 

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