Trinidad and Tobago’s economy appears to be slowly on mend, according to the latest stats released by the International Monetary Fund (IMF).
The IMF’s country report for the twin-island republic said in 2022, its real gross domestic product (GDP) expanded by 2.5%, supported by the non-energy sector and partially offset by a weak performance of its energy sector.
The IMF found that inflation in T&T reached 8.7% at the end of last year, driven by imported energy and food prices, partial liberalization of domestic fuel prices in 2022, and domestic floodings.
On the flip side, the IMF said that banks’ credit to the private sector is recovering and the banking sector appears well-capitalized, liquid, and profitable. It found that T&T’s current account surplus expanded, and foreign reserves coverage remained adequate at 7.6 months of prospective total imports.
Looking ahead, Trinidad’s recovery is expected to gain “broad-based momentum” with a 3.2% GDP expansion. Over the medium term, it said new energy projects will come into production but as oil and gas fields mature, potential growth will slow down to 1.5%.
Trinidad’s inflation is projected to slow down to 4.5% by end-2023 and will continue declining with international prices. Waning gas and petrochemicals exports starting in 2024 and the anticipated decline in global energy prices will result in a narrower current account surplus, averaging 6.7% of GDP. Its international reserve coverage is projected to remain adequate at around 6.5 months of prospective total imports by 2028.
The IMF lauded T&T for its prudent management of the energy revenue windfall and underscored the importance to continue rebuilding buffers. This commendation is notable, given that Trinidad demonstrated nearly two decades of “hand-to-mouth” spending in the lead-up to 2015, as discussed by the Inter-American Development Bank (IDB). The IMF also welcomed the US$345 million deposit into Trinidad’s Heritage and Stabilization Fund (HSF) last year.
With the economic recovery ongoing, it was recommended to continue prudently managing the energy revenue windfall, avoiding procyclical spending, and rebuilding fiscal buffers.
According to the IMF, Trinidad needs to step up efforts to secure an economic transformation
“The energy sector will remain the country’s main growth engine in the near to medium term. IMF staff welcomes the authorities’ efforts to take advantage of its existing petrochemical infrastructure and know-how to transition into clean energy. At the same time there is scope to diversify its exports products and markets,” it recommended.