Structurally lower crude oil prices will stymie activity in Trinidad & Tobago's energy sector over the coming years, driving a slowdown in headline growth. Moreover, tepid consumer confidence and a pull-back in government spending on infrastructure projects indicate that growth in non-energy sectors of the economy will also struggle.
Trinidad & Tobago's nominal budget shortfall will widen in 2015, as lower oil prices drive down energy sector revenues. The Trinidadian government will not reduce expenditures as it will look to support household spending as labour market dynamics deteriorate.
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. Open market operations by the central bank will prevent a significant depreciation of the currency, informing our view that a gradual weakening of the exchange rate is on the cards in the coming quarters.
Major Forecast Changes:
We have revised our current account surplus forecasts to 2.8% of GDP in 2015 and 2.1% of GDP in 2016 on the back of a weaker performance in crude oil export values than we had previously expected.
We now expect T&T to enter a recession in 2015 and contract again in 2016 as the economy remains uncompetitive for non-extractive investments and commodity prices are structurally lower.
Key Risks To Outlook
We acknowledge both upside and downside risks to our real GDP growth forecasts. On the downside, lower oil prices could spur a prolonged recession in T&T's economy, particularly if foreign investment into the energy sector dries up on the back of smaller prospective profit margins. On the upside, we will be watching to see if the Trinidadian government looks to secure any major bilateral loans, which could help to soften the impact of lower oil prices on the country's fiscal accounts.
The Trinidad & Tobago Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Trinidad & Tobago. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.
An influential new analysis of Trinidad & Tobago's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI Research.
- Forecast the pace and stability of Trinidad & Tobago's economic and industry growth through end-2019.
- Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
- Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
- Contextualise Trinidad & Tobago's country risks against regional peers using BMI's country comparative Risk Index system.
- Evaluate external threats to doing business in Trinidad & Tobago, including currency volatility, the commodity price boom and protectionist policies.
BMI provides our fully independent 5-year forecasts for Trinidad & Tobago through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.
Economic Outlook Contents
The Trinidad & Tobago Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.
Key Areas Covered:
- Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
- BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.
- Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
- Balance of Payments - trade and investment, current and capital account.
- Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
- Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
- Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
- Foreign Direct Investment - approvals, inflows and climate.
- External Debt - debt profile (short and long-term plus public and private sector obligations).
- Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.
- Rely upon BMI's 100% independent forecast scenarios for Trinidad & Tobago and underlying assumptions - we take no advertising and are privately-owned.
- Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Trinidad & Tobago, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
- Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.
What are the political risks to doing business in Trinidad & Tobago over the next 5-years?
BMI's Trinidad & Tobago country Risk Index evaluates the short- and medium-term threats to political stability.
Political Outlook Contents
- SWOT Analysis for the Trinidad & Tobago Market - Political Strengths, Weaknesses, Opportunities and Threats facing Trinidad & Tobago.
- Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Trinidad & Tobago's risk are compared with regional and global averages.
- Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
- Long-Term Political Outlook BMI examines the structural risks to the stability of Trinidad & Tobago’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.
- Benchmark Trinidad & Tobago's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
- Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
- Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.
What are the current operational risks and difficulties associated with doing business in Trinidad & Tobago?
The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Trinidad & Tobago against its neighbours.
Operational Risk Contents
The chapter provides a summary of the main threats in the country, within:
- Labour Market Risk (Education; Availability of Labour; and Labour Costs)
- Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
- Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
- Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).