Trinidad and Tobago Economic Structure

 Trinidad and Tobago’s economic structure had received a tremendous boost during 2001-2007, when the GDP increased at an annual rate of 7.6%. While the growth had been largely driven by the energy sectors, as reflected in the establishment of liquid gas and other petrochemical facilities, the non-energy sector also expanded briskly at the rate of 5.4% annually. However, the global economic crisis hit Trinidad & Tobago (T&T) in 2009 and its economy was adversely affected. The economy experienced a contraction of 5.6% YOY in 3Q 2009.

 Trinidad and Tobago’s economic structure had received a tremendous boost during 2001-2007, when the GDP increased at an annual rate of 7.6%. While the growth had been largely driven by the energy sectors, as reflected in the establishment of liquid gas and other petrochemical facilities, the non-energy sector also expanded briskly at the rate of 5.4% annually. However, the global economic crisis hit Trinidad & Tobago (T&T) in 2009 and its economy was adversely affected. The economy experienced a contraction of 5.6% YOY in 3Q 2009. The economic downturn has also been associated with a significant easing in inflationary pressures in the latter part of the year. The drop in inflation to record lows of 1.3% in December 2009 was largely due to plummeting oil, food and commodity prices.[br] 

During 2009, financial system liquidity continued to accumulate, with commercial banks’ excess reserves averaging $2,179.1 million monthly, as compared to $632.6 million in 2008. The net domestic fiscal injections, which amounted to $15,760.5 million in 2009, had a significant impact on the liquidity levels. The high levels of liquidity contributed to a reduction in both short and long term interest rates in 2009. On November 2009, the private sector credit contracted by 4.2% YOY. At the end of the fiscal year 2008-09, the gross public debt stock had increased to $62.7 billion, from $59.8 billion at the end of the FY 2007-08. The central government debt had increased to $34.1 billion at the end of FY 2008-09, from $33.2 billion at the end of FY 2007-08.

Trinidad and Tobago Economic Structure: Immediate Challenges[br]

Despite the government’s expansionary fiscal policies, Trinidad and Tobago needs to see a resurgence of business activities. With the drop in the inflation levels, in conjunction with the slowdown in the labor markets, business recovery should benefit from the easing of wage pressures. With oil prices rising to $75-$80 per barrel, production can ease the economic pressure in the form of higher exports in 2010. According to the government’s Vision 2020 strategy, there is a need for diversification through the creation of new businesses that produce high-end goods and services that are globally competitive. At the macro-economic level, the provision of public goods and services is critical to the growth process. The focus should be on improvement of infrastructure – roads, water, electricity, ports, etc. Additionally, Trinidad and Tobago needs to improve its rating on the World Bank’s ‘Doing Business’ report, and eliminate needless bureaucratic red tape in setting up businesses and enforcing contracts.