Market Research Logo

Trinidad and Tobago Country Risk Report Q2 2015

Trinidad and Tobago Country Risk Report Q2 2015

Core Views

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
H215.
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, %

Download our eBook: How to Succeed Using Market Research

Learn how to effectively navigate the market research process to help guide your organization on the journey to success.

Download eBook

Share this report