(Trinidad Express, 29.Jul.2021) — Rating agency Standard and Poor’s says it expects T&T’s oil and natural gas production to rise next year.
But the rating agency, which assessed T&T as a BBB- investment-grade rating this week, said it does not expect the increased production to result in the domestic economy climbing back to 2014 levels.
“We expect that, after reaching their lowest point in over a decade, oil and gas production will rise through our forecast horizon. This, together with higher prices, will lead to a recovery in the energy sector.
“However, following a likely accumulated GDP contraction of nearly 10 per cent between 2019 and 2021, after weak economic performance during the past decade, the economic recovery may not bring GDP per capita back toward past highs of more than US$18,000 during the forecast horizon.”
The rating agency pointed out that even before the pandemic, which started in March 2021, T&T’s natural gas production had declined by nearly 30 per cent in the last decade.
“In the past several years, domestic gas production has been insufficient to meet the demands of the downstream sector. Although most petrochemical plants have re-opened in 2021 following temporary closures, the downstream sector is smaller today than it was before the pandemic,” S&P said.
S&P said its affirmation of T&T’s BBB- rating reflects the country’s favourable external profile and stable democracy.
The rating agency said: “They also reflect the still-solid level of government financial assets that mitigate the effect of economic cycles on fiscal and external performance. Over the past 15 years, the country accumulated savings that have stabilised the economy in the face of fluctuating commodity prices. This is particularly relevant for Trinidad and Tobago as the energy sector represented nearly one-quarter of GDP and government revenues, and nearly 80 per cent of exports, on average, in the past five years.”
But the rating agency warned that the energy sector’s sharp downturn over the past several years, exacerbated by the pandemic, posed risks to the country’s ability to respond to shocks.
S&P also said the limited effectiveness of policy response-—particularly given a heavily managed exchange rate and limited monetary flexibility—also posed risks to T&T’s ability to respond to shocks.
Kamla’s comments
In a statement yesterday, Opposition Leader Kamla Persad-Bissessar noted that BBB—is one notch above official “junk status”.
She said S&P downgraded T&T to BB+ in 2017 and downgraded the country in 2019 and 2020.
“A rating of BBB- is one notch above official Junk status. This is how far our nation has fallen under the PNM. That “plus” Rowley trivializes took T&T decades to attain, representing over 10 years’ worth of economic improvement and development,” she stated.
Persad-Bissessar added that the S&P economic indicators highlight these downgrades started a full three years before the Covid-19 pandemic.
“Essentially these successive downgrades indicate that decades of economic progress have disappeared in just four years under the PNM’s gross mismanagement,” she was quoted as saying.
Persad-Bissessar pointed out that only last week, we learnt that Trinidad and Tobago has the worst Foreign Direct Investment profile in the Caribbean, lagging even Haiti.
“What is truly disturbing is that despite the sound of these economic alarm bells ringing this PNM government continues to bury its head in the sand,” she stated.
Persad-Bissessar said the statement on Tuesday by Finance Minister Colm Imbert praising this week’s S&P rating saying it “validates” the government’s policy is “beyond belief”.
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