Trinidad & Tobago (T&T)'s economy will see weak economic activity growth in the coming years, as persistently weak oil prices weigh on consumption, investment and net exports. Low oil prices will compound the country's hydrocarbon sector poor 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. Open market operations by the central bank will prevent a significant depreciation of the currency, although the bank will allow the unit to gradually depreciate in the coming quarters.
Major Forecast Changes:
We have downwardly revised our current account surplus forecast to 1.0% of GDP in 2016 and 1.7% in 2017 due to continued weakness in oil exports.
We have downwardly revised our fiscal deficit forecast to 7.6% of GDP in 2016 and 7.4% in 2017 due to our Oil & Gas team's downward revision of its forecast oil price.
The primary risks lie to the downside. Should oil prices remain at current levels through 2016, the recession in T&T could be more severe than currently anticipated. In such a scenario, the CBTT could allow the Trinidadian dollar to depreciate more quickly than forecast, precipitating rising inflation, falling imports and a risk of capital flight.
|e/f=BMI estimate/forecast; Source: National Sources/BMI|
|Real GDP growth, % y-o-y||1.9||-1.5||-0.2||2.7|
|Nominal GDP, USDbn||28.2||28.5||28.6||28.1|
|Consumer price inflation, % y-o-y, eop||8.5||3.3||3.9||5.3|
|Exchange rate TTD/USD, eop||6.36||6.42||6.50||6.75|
|Budget balance, % of GDP||-2.7||-5.8||-7.6||-7.4|
|Current account balance, % of GDP||5.8||1.7||1.0||1.7|
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