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Trinidad and Tobago Country Risk Report Q1 2017

  • November 2016
  • -
  • Business Monitor International
  • -
  • 43 pages

Core Views

Trinidad & Tobago (T&T)'s economy will see weak economic activity growth in the coming years, as structurally lower oil prices weigh on consumption, investment and net exports. Low oil prices will weigh on the hydrocarbon sector's production outlook, while non-oil industries will struggle to become competitive.

The government will post consistent fiscal deficits, as low oil prices weigh on revenue collection. Expenditure cuts will be limited, as the government seeks to support economic activity. Lower oil prices will place depreciatory pressure on the Trinidadian dollar (TTD) over the coming quarters, resulting in a deterioration of the country's terms of trade and weaker investment inflows. Tight control over foreign exchange sales by the central bank will prevent a significant depreciation of the currency, although the bank will allow the unit to gradually depreciate.

Major Forecast Changes We have downgraded our real GDP forecasts for 2016 and 2017 to -2.3% and 2.0%, from -1.7% and 2.5% previously, amid signs of weak investment and consumption. We have upwardly revised our forecast exchange rates in light of the CBTT's decision to support the unit at a higher rate than previously expected. We forecast an average exchange rate of TTD7.25/USD in 2017, up from TTD7.60/USD previously.

Table Of Contents

Trinidad and Tobago Country Risk Report Q1 2017
Executive Summary 5
Core Views 5
Major Forecast Changes 5
Key Risks5
Chapter 1: Economic Outlook7
SWOT Analysis 7
BMI Economic Risk Index 7
Economic Growth Outlook 8
Improvement In Energy Sector Will Drive Rebound 8
Trinidad and Tobago will stage a modest growth recovery in 2017, benefiting from higher average energy prices and new natural gas
production However, fiscal consolidation efforts and a lack of economic diversification will cap growth over the coming years
GDP By Expenditure Outlook 9
TABLE: GDP GROWTH FORECASTS 9
TABLE: PRIVATE CONSUMPTION FORECASTS 10
TABLE: GOVERNMENT CONSUMPTION FORECASTS10
TABLE: FIXED INVESTMENT FORECASTS 10
TABLE: NET EXPORTS FORECASTS 10
Fiscal Policy And Public Debt Outlook11
Fiscal Shortfall Will Remain Wide 11
Trinidad and Tobago's fiscal deficit will remain wide over the coming years, driving debt accumulation To reduce its shortfalls, fiscal
consolidation efforts will turn toward reducing social spending obligations
Structural Fiscal Position 12
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES13
External Trade And Investment Outlook 14
Rising Energy Prices Offer Some Support To Current Account14
Trinidad and Tobago's current account deficit will narrow in 2017, as higher average energy prices support a rebound of the country's
natural gas exports Nonetheless, the country's weakened external position will put downside pressure on its exchange rate regime and
risk additional downgrades of its sovereign credentials
Outlook On External Position 15
TABLE: CAPITAL and FINANCIAL ACCOUNT BALANCE 15
TABLE: TOP 5 GOODS IMPORTS IN 2015 16
TABLE: TOP 5 GOODS EXPORTS IN 201516
Monetary Policy 17
Inflation And US Hikes Will Drive Tightening17
The Central Bank of Trinidad and Tobago will enter a rate hiking cycle in 2017 in response to accelerating inflation and rate hikes in the
US Higher average energy prices and a narrower fiscal deficit will support liquidity in the domestic financial system
Monetary Policy Framework 18
TABLE: MONETARY POLICY FORECASTS 18
Currency Forecast 18
TTD: Further Depreciation Amid Weak External Accounts 18
The CBTT will continue to allow the Trinidadian dollar to depreciate over the coming year, as the country's external accounts remain
under significant pressure While gradually rising energy prices will offer some support to policymakers' efforts to defend the unit, a more
substantial depreciation is likely within the coming two years
TABLE: BMI CURRENCY FORECAST 19
Contents
Chapter 2: 10-Year Forecast 21
The Trinidad and Tobago Economy To 202521
Oil Dependence Will Weigh On Growth Outlook21
Trinidad and Tobago's hydrocarbon-dependent economy will experience a decade of modest growth in light of structurally lower energy
prices Diversification will be precluded by the government's weak fiscal position and challenging business environment
TABLE: LONG-TERM MACROECONOMIC FORECASTS 21
Chapter 3: Political Outlook 25
SWOT Analysis 25
BMI Political Risk Index25
Domestic Politics26
Contentious Opposition And Local Elections Will Weigh On Fiscal Reform 26
Policymakers in Trinidad and Tobago will continue to struggle to develop and implement economic reforms amid a contentious political
environment Legislative opposition will remain a persistent weight on government attempts to narrow the fiscal deficit and address
external account imbalances, weighing on the business environment
TABLE: POLITICAL OVERVIEW 26
Long-Term Political Outlook 27
Economic Slowdown Will Challenge Institutional Capacity 27
In light of structurally slower economic growth, Trinidad and Tobago's governing institutions will be challenged to address pressing social
and political issues, including poverty, crime and ethnic tensions Well-established democratic norms will underpin broad political
stability, though power is likely to continue to trade hands
Chapter 4: Operational Risk 31
Operational Risk 31
TABLE: CARIBBEAN - LABOUR MARKET RISK 31
TABLE: CARIBBEAN - LOGISTICS RISK 32
TABLE: CARIBBEAN - TRADE AND INVESTMENT RISK 34
TABLE: CRIME AND SECURITY RISK 36
Chapter 5: BMI Global Macro Outlook39
Global Macro Outlook 39
Austerity Has Peaked, But Populism Is Not Yet Policy 39
TABLE: GLOBAL ASSUMPTIONS39
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % 40
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % 41
TABLE: TRINIDAD and TOBAGO - MACROECONOMIC DATA and FORECASTS 43

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