Trinidad and Tobago Country Risk Report Q2 2015
Structurally lower crude oil prices will stifle activity in Trinidad &Tobago's energy sector over the coming years, driving a slowdownin headline growth. Moreover, weak consumer confidence and apull-back in government spending on infrastructure projects indicatethat non-energy sectors of the economy will also struggle.
Trinidad & Tobago's 2015 general election will be narrowly contested,as a notable increase in homicides depresses support for the rulingcoalition. However, security will remain a key concern for investorsand the public at large, regardless of the election outcome.
Trinidad & Tobago's nominal budget shortfall will widen in 2015, aslower oil prices drive down energy sector revenues. The Trinidadiangovernment will reduce expenditures, but election-year considerationswill still see spending outpace revenues, driving the fiscal deficitfurther into the red.
Lower oil prices will place depreciatory pressure on the Trinidadiandollar over the coming quarters through a sharp narrowing ofTrinidad & Tobago's current account surplus. That said, interest ratehikes and open market operations by the central bank are likely topreclude a more substantial depreciation of the exchange rate.
Major Forecast Changes
Our Oil & Gas team downgraded its multiyear price outlook foroil prices in early January due to a sustained global supply glut,prompting us to revise our forecasts for T&T's real GDP growth.
We forecast the price of WTI crude oil to average USD52.0/bbl andUSD56.0/bbl in 2015 and 2016, down from USD93.1/bbl in 2014,and remain below USD65.0/bbl through 2019. As a result, we haverevised down our 2015 headline growth forecast from 3.0% to -0.2%,and our 2016 forecast from 3.5% to 0.8%.
- Executive Summary
- Core Views
- Major Forecast Changes
- Key Risks To Outlook
- Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Index
- Domestic Politics
- Growing Security Challenges To Drive Close Election
- Trinidad & Tobago's 2015 general election will be narrowly contested, as a notable increase in homicides depresses support for the
- ruling coalition. Security will remain a key concern for investors and the public, regardless of the electoral outcome.
- TABLE: Political Overview
- Chapter 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Index
- Economic Activity
- Drop In Oil Prices To Stymie Economic Recovery
- Structurally lower crude oil prices will stifle activity in Trinidad & Tobago (T&T)'s energy sector over the coming years, driving a
- slowdown in headline growth. Moreover, weak consumer confidence and a pull-back in government spending on infrastructure projects
- indicate that non-energy sectors of the economy will also struggle.
- TABLE: Economic Activity
- Fiscal Policy
- Weaker Energy Revenues To See Budget Deficit Widen
- Trinidad & Tobago's nominal budget shortfall will widen in 2015, as lower oil prices drive down energy sector revenues. The Trinidadian
- government will reduce expenditure, but election-year considerations will still see spending outpace revenues, driving the fiscal deficit
- further into the red.
- TABLE: Fiscal Policy
- Monetary Policy
- Rate Hikes To Continue In 2015 And 2016
- The Central Bank of Trinidad & Tobago (CBTT) will continue to hike the benchmark repo rate over the coming quarters, in line with
- our end-2015 and end-2016 repo rate forecasts of 3.75% and 4.25% respectively. The CBTT will hike rates in order to preclude a
- substantial narrowing of the bank's interest rate differential with the US Federal Reserve, as the latter begins to raise interest rates in
- TABLE: Monetary Policy
- Exchange Rate Policy
- TTD: Weakening Trade Dynamics To Drive Depreciation
- Lower oil prices will place depreciatory pressure on the Trinidadian dollar over the coming quarters through a sharp narrowing of
- Trinidad & Tobago's current account surplus. However, interest rate hikes and open market operations by the central bank are likely to
- preclude a more substantial depreciation of the exchange rate.
- TABLE: BMI CURRENCY FORECAST
- TABLE: Exchange Rate
- Balance Of Payments
- Lower Oil Prices To Drive Narrower Current Account Surplus
- Trinidad & Tobago's external accounts will face headwinds from lower oil prices in the coming years. A weaker export performance by
- the energy sector will drive a narrowing of the current account surplus, while lower levels of foreign investment will likely see the capital
- and financial account balance remain in the red.
- TABLE: Current Account
- Chapter 3: 10-Year Forecast
- The Trinidad & Tobago Economy To 2024
- Structurally Lower Oil Prices To Drag On Long-Term Growth
- Structural weaknesses and external headwinds from lower energy prices will see Trinidad & Tobago's real GDP growth average a tepid
- 1.5% through to 2024. Moreover, we see limited upside for growth in the economy's non-energy sectors of the economy, including
- tourism and financial services.
- TABLE: Long-Term Macroeconomic Forecasts
- Chapter 4: Operational Risk
- SWOT Analysis
- Operational Risk Index
- Operational Risk
- table: Caribbean - Operational Risk
- table: Caribbean - Labour Market Risk
- table: Caribbean - Logistics Risk
- TablE: Caribbean - Trade And Investment Risk
- table: Caribbean - Crime And Security Risk
- Chapter 5: BMI Global Assumptions
- Global Outlook
- Weaker EMs To Weigh On Growth
- Table: Global Assumptions
- Table: Developed States, Real GDP GrowtH, %
- Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
- Table: Emerging Markets, Real GDP Growth, %