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Trinidad and Tobago Country Risk Report Q2 2016

  • February 2016
  • -
  • Business Monitor International
  • -
  • 41 pages

Core Views

Trinidad & Tobago (T&T)'s economy will grow weakly in the comingyears as persistently weak oil prices weigh on consumption,investment and net exports. Low oil prices will compound the pooroutlook for the country's hydrocarbon sector production, while non-oilindustries will struggle to become competitive.The government will post consistent fiscal deficits as low oil pricesweigh on revenue collection. Expenditure cuts will be limited as thegovernment seeks to support economic activity.Lower oil prices will place depreciatory pressure on the Trinidadiandollar (TTD) over the coming quarters, resulting in a deterioration ofthe country's terms of trade and weaker investment inflows. Openmarket operations by the central bank will prevent a significantdepreciation of the currency, although the bank will allow the unitto gradually depreciate in the coming quarters.Major Forecast ChangesWe have downwardly revised our current account surplus forecast to1.0% of GDP in 2016 and 1.7% in 2017 due to continued weaknessin oil exports.We have downwardly revised our fiscal deficit forecast to 7.6% ofGDP in 2016 and 7.4% in 2017 due to our Oil & Gas team's downwardrevision to its oil price forecast.

Table Of Contents

Trinidad and Tobago Country Risk Report Q2 2016
Executive Summary 5
Core Views5
Major Forecast Changes5
Key Risks5
Chapter 1: Economic Outlook 7
SWOT Analysis 7
BMI Economic Risk Index 7
Economic Growth Outlook 8
Recession Will Continue In 20168
Trinidad and Tobago's economy will remain in recession in 2016 as oil prices remain weak, weighing on the country's exports
and reducing investment flows In the coming years, growth will be tepid as the country's non-oil industries struggle to become
competitive
GDP By Expenditure Outlook 9
TABLE: GDP GROWTH FORECASTS9
TABLE: PRIVATE CONSUMPTION FORECASTS9
TABLE: GOVERNMENT CONSUMPTION FORECASTS10
TABLE: FIXED INVESTMENT FORECASTS10
TABLE: NET EXPORTS FORECASTS10
Fiscal Policy And Public Debt Outlook 11
Persistent Fiscal Deficits Will Undermine Sovereign Credentials11
Trinidad and Tobago will post consistent fiscal deficits in the coming years as structurally lower oil prices weigh on revenue growth,
while the government struggles to rein in expenditures A rising debt load will undermine investor perceptions and raise financing
costs
Structural Fiscal Position 12
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES12
External Trade And Investment Outlook 13
Current Account Surpluses Mask Deterioration13
Trinidad and Tobago's external accounts will continue to deteriorate in the coming years as structurally lower oil prices weigh on the
country's large hydrocarbon sector Declining exports and slowing investment flows will temper reserve accumulation, eroding the
country's net creditor position
Outlook On External Position 14
TABLE: CAPITAL and FINANCIAL ACCOUNT BALANCE15
TABLE: TOP 5 GOODS IMPORTS IN 201415
TABLE: TOP 5 GOODS EXPORTS IN 201415
Monetary Policy 16
Continuing Recession Will Temper Additional Hikes16
The Central Bank of Trinidad and Tobago will temper its rate-hiking cycle in 2016 in response to the continuing recession, adding 50bps of
hikes to bring the policy rate to 525% by end-2016 The rate hikes will help stabilise inflation and avoid capital flight 16
TABLE: INTEREST RATE and INFLATION FORECASTS16
Monetary Policy Framework 17
Currency Forecast 18
TTD: Deteriorating External Accounts Will Force Depreciation18
The Central Bank of Trinidad and Tobago will continue to support the Trinidadian dollar in the coming months as it attempts to prevent
capital flight and inflation from adding to the economy's woes Within the next two years, the country's deteriorating external accounts
will force the unit's depreciation
TABLE: BMI CURRENCY FORECAST18
Chapter 2: 10-Year Forecast 21
The Trinidad and Tobago Economy To 2025 21
Structurally Lower Oil Prices To Drag On Long-Term Growth21
Structural weaknesses and external headwinds from lower energy prices will see tepid real GDP growth in Trinidad and Tobago through
2025 We see limited upside for growth in the non-energy sectors of the economy, including tourism and financial services
TABLE: LONG-TERM MACROECONOMIC FORECASTS21
Chapter 3: Political Outlook 23
SWOT Analysis 23
BMI Political Risk Index 23
Domestic Politics 24
Violent Crimes Will Undermine Business Environment24
An uptick of violent crimes in Trinidad and Tobago will undermine the country's political and business environment, creating additional
headwinds for its ailing economy Institutional weaknesses within the police force will preclude substantial improvements in the security
environment in coming years
TABLE: POLITICAL OVERVIEW 24
Long-Term Political Outlook 25
Economic Slowdown Will Challenge Institutional Capacity25
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 29
SWOT Analysis 29
Operational Risk Index 29
Operational Risk 30
TABLE: CARIBBEAN - LABOUR MARKET RISK30
TABLE: CARIBBEAN - LOGISTICS RISK32
TABLE: CARIBBEAN - TRADE AND INVESTMENT RISK 34
TABLE: CARIBBEAN - CRIME AND SECURITY RISK36
Chapter 5: BMI Global Macro Outlook 37
Global Macro Outlook 37
Downside Risks Gather Momentum37
TABLE: GLOBAL ASSUMPTIONS37
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %38
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, % 38
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %39
TABLE: MACROECONOMIC DATA and FORECASTS 41

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