PORT OF SPAIN, Trinidad, CMC – The Trinidad and Tobago government has welcomed the latest international credit ratings for the oil-rich twin island republic after the US-based agency, Standard & Poor’s (S&P) affirmed the country’s BBB- credit rating, with a stable outlook.
“S&P’s affirmation of our credit rating is a positive development, and Trinidad and Tobago is one of the few investment-grade countries within the Latin America and Caribbean region, and the only one in the Caribbean,” said Finance Minister Colm Imbert.
Earlier this month, another US-based rating agency, Moody’s, affirmed the country’s Ba2 sovereign rating, also moving the country’s outlook to positive from stable.
“We believe Trinidad and Tobago’s economy will expand by 2.5 percent in 2023 and 1.7 percent in 2024, reflecting still supportive global energy prices, oil and gas production in line with prior-year levels, and continued growth in the non-energy sector,” S&P said.
“Government revenues improved significantly last year, and we expect they will remain relatively high over the next few years.
“Exports increased about 50 percent year over year in 2022, and we expect they will decline slightly while remaining above historical levels. Continued current account surpluses will also help slow the decline in central bank reserves, while significant government liquid assets limit fiscal and external financing risks,” it added.
In a statement, the Ministry of Finance said that while the credit rating had a negative outlook up to July last year, the country’s economic and financial performance and institutional stability helped stabilize the tower. It said this stable outlook has now been reaffirmed.
“The credit rating reflects Trinidad and Tobago’s favorable external profile and stable democracy. It also reflects still-solid government financial assets that mitigate the effect of economic cycles on fiscal and external performance,” S&P said in its latest position on Trinidad and Tobago.
It also noted that faced with a propitious situation in 2022, the government “used the surplus to accelerate Value Added Tax (VAT) refunds and contribute to the Heritage and Stabilisation Fund (HSF).
S&P said it does not expect “net debt [to] rise materially, and to remain below 30 percent of GDP, supported by assets held in the country’s HSF” and that “unlike many commodity exporters, during boom years, T&T saves excess fiscal revenues in the HSF.”
Imbert said, “S&P acknowledges the prudent management of an economy faced with external shocks: supporting the economy and the population under challenging times, conservatively replenishing external buffers, and lowering public debt in better times.
“Those are the attributes of investment grade countries and the condition for affordable financing looking forward,” he added.
In its report, S&P said a heavily managed exchange rate and a small open economy will continue to limit the effectiveness of monetary policy.
“The Central Bank has sustained a quasi-fixed exchange rate since 2016,” added the rating agency. “Since then, US dollar shortages have constrained economic activity, weakening local businesses’ ability to pay suppliers and obtain key imports.”
S&P noted that the Central Bank lowered its repurchase rate to 3.5 percent from five percent at the start of the pandemic in a more accommodative monetary policy stance and has kept the pace at that level since.
“As US Treasury rates rise, the interest rate differential between local securities and US Treasuries has once again become negative, which could have implications for capital outflows,” it said, noting that Trinidad and Tobago’s inflation rate had historically been low, averaging 2.1 percent between 2017 and 2021.
But it acknowledged that, like many other countries, Trinidad and Tobago faced higher-than-usual inflation in 2022 (5.8 percent), and the rating agency expects price level growth will remain high at about 5.1 percent in 2023 before falling to two percent in the next three years.
and then 