International Monetary Fund: Trinidad’s Economy “Turning the Corner”

Above: St Augustine, Trinidad

By the Caribbean Journal staff

Despite “ongoing technical disruptions” in Trinidad’s energy sector, the country’s economy is showing positive signs, according to the International Monetary Fund, which completed a visit to conduct the 2011 Article IV consultation.

“There is concrete evidence that the economy is turning the corner and that economic growth will resume in 2012 notwithstanding the ongoing technical disruptions of the energy sector,” said Judith Gold, head of the IMF Mission to Trinidad and Tobago, in a statement.

The IMF team met with senior officials from the government and the central bank, along with representatives from the private sector, to talk about recent macroeconomic trends, medium-term prospects and policy challenges.

The IMF projects real economic activity in Trinidad to increase by 1.7 percent in 2012, as private sector credit expansion gains momentum, and the resolution of “largely failed insurance company” CLICO proceeds.

Trinidad will also be boosted by a faster pace of government investment and a return to normal for energy production, Gold said, but certain risks remain.

“There are downside risks to the forecast stemming from the global economic environment, uncertainty in gas prices, and possible delays in the implementation of the public sector investment programme,” Gold said.

Trinidad’s economy contracted by 1.3 percent in 2011, following no growth in 2010 and a “significant decline” in 2009, according to the IMF.

“The mission agrees that the near-term focus of fiscal policy should be on reviving economic activity, and the timely implementation of the investment programme should be a priority,” Gold said. “The completion of CLICO claims will also be important to defuse remaining uncertainties.”

For Trinidad’s significant energy sector, challenges exist due to the projected depletion of oil and gas reserves and the uncertainty in the gas market as a result of the shale gas production in the United States, the IMF said.

“Looking forward, adapting the [energy] sector’s investment framework and the fiscal regime to ensure its competitiveness will be essential,” Gold said. “Just as critical will be the continued effort to diversify the economy.”