Download Trinidad and Tobago Business Forecast Report Q2 2011 Brochure

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Trinidad and Tobago Business Forecast Report Q2 2011
Description:
Structural Problems Emerging
In our last Business Forecast Report, we argued that the extent of challenges facing Trinidad & Tobago’s
economy would become clearer as we head into 2011, and recent data reaffirm this view. It now appears as
though real GDP growth only just turned positive in 2010 (since our last report, we have revised down our
2010 estimate to 0.5% from 2.4% previously) and it does not look like things will improve much in 2011.
There are also plenty of external factors that could exacerbate Trinidad & Tobago’s economic and political
woes over the next few quarters, ranging from ongoing commodity price volatility to investor caution
towards emerging markets in general. Broadly speaking, we see few reasons to revise our bleak outlook for
the economy.
On the political front, we expect the furore surrounding the wire-tapping scandal to provide little additional
support to the government’s approval ratings, with the massive challenges facing the current administration
ikely to start weighing on its popularity in 2011. One issue set to dog the government throughout 2011 is the
mess surrounding CL Financial’s bailout, with ongoing uncertainty surrounding the future of both CLICO (the
insurance firm from which CL Financial expanded) and other various subsidiaries. Another risk is that the
electorate becomes disillusioned with Prime Minister Kamla Persad-Bissessar’s flagship policy of fighting
crime, particularly if her government’s economic reforms fail to bring about a reduction in unemployment.
One of the main economic challenges facing the authorities in 2011 and beyond is how to reduce the
country’s exposure to bouts of severe inflationary pressure that have blighted economic development over
recent years. Should the government and central bank both prove ineffective in addressing domestic
bottlenecks, which have served to exacerbate the impact of global commodity price volatility, we believe this
would further hamper the economy’s investment and growth outlook down the line. Unfortunately, the
current administration’s significant fiscal problems – most recently demonstrated by concerns over state-run
Petroleum Company of Trinidad & Tobago’s ability to service debt obligations – mean the government
appears relatively powerless to tackle this issue.
Contents:
Executive Summary
Structural Problems Emerging
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
Government Support To Wane In 2011
We expect the furore surrounding the wire-tapping scandal in Trinidad & Tobago to provide little additional
support to the government’s approval ratings
Table: Political Overview
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Few Hopes For Non-Energy Sector
Trinidad & Tobago’s government will be unable to boost growth in the non-energy sector in 2011 and 2012,
as weak domestic credit expansion, fiscal consolidation and low foreign direct investment inflows cap the
level of capital available to local businesses and consumers
TABLE: ECONOMIC ACTIVITY
Monetary Policy
Inflation Risks To Investment
We are concerned that Trinidad & Tobago will face similar bouts of destructive inflation that have blighted
the economy over recent years
Table: MONETARY POLICY
Fiscal Policy
Petrotrin’s Debt Burden Exacerbates Fiscal Concern
Our concerns over Trinidad & Tobago’s fiscal health have been heightened by the financial difficulties facing
state-run Petroleum Company of Trinidad and Tobago
Table: FISCAL POLICY
Exchange Rate Policy
No Devaluation, But Depreciation Likely
Barring short-term selling pressure in the last few days of 2010, our projection that the Trinidad & Tobago
(T&T) dollar would stay range bound between TTD 6.2800-6.3300/US $ played out, and we expect this to
continue over the next few months
TABLE: EXCHANGE RATE
Regional Monetary Policy
Inflation: Key Risks And Core Scenarios For 2011
Rising inflation will be a concern for economies across Latin America and the Caribbean in 2011
Regioal Sovereign Risk Rating
Fortune Favours The Frugal
Latin America’s sovereign risk credentials continue to improve , boosted by broadly strong growth rates and
high commodity prices
table: LATIN AMERICA SOVEREIGN RATINGS – EVOLUTION OF ABILITY TO PAY
table: LATIN AMERICA SOVEREIGN RATINGS – EVOLUTION OF WILL INGNESS TO PAY
Chapter 3: 10-Year Forecast
The Trinidad & Tobago Economy To 2020
Major Challenges Remain
We have turned increasingly pessimistic towards Trinidad & Tobago’s long-term growth trajectory of late,
although we believe the economy will remain the Caribbean standard bearer over the next decade
TABLE: Long-Term Macroeconomic Forecasts
Chapter 4: Business Environment
SWOT Analysis
BMI Business Environment Risk Ratings
Business Environment Outlook
Institutions
Table: BMI Business And Operation Risk Ratings
Infrastructure
Table: BMI Legal Framework Rating
Market Orientation
Table: Labour Force Quality
Operational Risk
TABLE: LATIN AMERICA , ANNUAL FDI INFLOWS
Table: Trade And Investment Ratings
Table: TOP EXPORT DESTINATIONS
Chapter 5: BMI Global Assumptions
Global Outlook
Growth Solidifies, But Inflation Poses A Threat
Table: Gl obal Assumptions
TABLE: GLOBAL & REGIONAL REAL GDP GROWTH % CHG Y-O-Y
TABLE: CONSENSUS FORECASTS
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