Business
S&P lowers Trinidad & Tobago credit rating – Falling oil prices blamed
International credit rating agency Standard & Poor’s (S&P) has revised to negative its outlook on the economy of Trinidad & Tobago.
The agency affirmed its ‘A/A-1’ long-and short-term sovereign credit ratings on country, but “revised the outlook on the long-term ratings to negative from stable. Our ‘AA’ transfer and convertibility assessment for Trinidad & Tobago is unchanged,” S&P said.
In a report issued late last week, S&P said the change in outlook to negative from stable “reflects an at least one-in-three chance that prolonged low energy prices and potentially poor gross domestic product (GDP) growth prospects could result in a steadily rising debt burden, leading to a downgrade in the next 2 years.”
According to S&P, the public finances of the twin-island republic are vulnerable to a prolonged and substantial drop in energy revenues. “The energy sector contributed around half of total government revenues during the recent boom years, but may contribute less than 20 percent of total government revenues in fiscal year 2015-2016”.
The report added that fiscal revenues from the energy sector fell to 10.9 percent of GDP last year from 16.2 percent in the previous year and were only partially offset by a rise in non-energy revenues.
Falling Oil Prices
“They are set to decline again this year as a share of GDP,” the rating agency said. S&P says falling energy prices also sharply reduced the country’s typically large trade and current account surpluses.
The credit rating agency said the non-energy sector, which may have fallen into recession in 2015, is likely to perform poorly in 2016. “We project that the country’s average per capita GDP growth rate, which has been less than 1 percent in the past 5 years, to be just over 1 percent over the next 3 years, assuming a gradual recovery in energy prices and continued investment in the sector,” it said.
Competitiveness
Concerning the exchange rate, S&P said “the country’s exchange rate, adjusted for different inflation rates among its trading partners, has appreciated nearly 30 percent since 2010, potentially affecting negatively Trinidad & Tobago’s long-term external competitiveness.”
