IMF Executive Board Concludes 2011 Article IV Consultation Discussions with Trinidad and Tobago

Public Information Notice (PIN) No. 12/40
April 27, 2012

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

On March 28, 2012, the Executive Board of the International Monetary Fund (IMF) concluded the 2011 Article IV consultation discussions with Trinidad and Tobago.1


The economy of Trinidad and Tobago is turning the corner and growth is expected to resume in 2012 after an extended slowdown lasting three years. A range of indicators point to a broad turnaround in the non-energy sector beginning in the second half of 2011. Real GDP is estimated to have contracted by 1.3 percent in 2011 mainly reflecting production disruptions in the energy sector and a lackluster performance in the non-energy sector. Inflation has picked up, rising from a historic low of 0.6 percent in August 2011 to 6.8 percent in January 2012, as food prices increased. However, core inflation, remained low at 1.8 percent in January. Unemployment has remained moderate 5.8 percent in mid-2011. The current account surplus rebounded strongly to 20 percent of GDP in 2010 and an estimated 21 percent in 2011 from 8 percent in 2009, stemming mainly from the improvement in oil prices and a recovery in non-energy exports. Gross official reserves reached US$9.8 billion (over 13 months of imports) at end-December 2011.

In the 2010/11 fiscal year, the central government’s finances were nearly balanced thanks to a strong revenue performance and lower than planned current and capital spending. Nevertheless, the deterioration in the non-energy balance implied a large fiscal stimulus. The debt-to-GDP ratio has significantly risen from 25 percent of GDP in 2008 to 33 percent in 2011.

In the face of subdued inflation, the Central Bank of Trinidad and Tobago (CBTT) has maintained an accommodative monetary policy lowering the policy rate by 75 basis points since end-2010 to 3 percent. After a decline that lasted 20 months, commercial bank credit to the private sector has been noticeably more dynamic since mid-2011 (5.3 percent growth in November y-o-y), consistent with the non-energy sector recovery. Commercial banks remain well capitalized, profitable, and liquid. The banking system’s non-performing loans (NPLs), after peaking at 7.6 percent of total loans in August 2011, have declined to 6.4 percent in November and remain low by regional standards. Following the collapse of the CL Financial Group and its insurance subsidiary, CLICO, significant progress has been made in compensating CLICO claimants. Nevertheless, vulnerabilities remain.

Real economic activity is expected to increase by 1.7 percent in 2012 as the non-energy sector picks up momentum with the acceleration of government investment and the restructuring of CLICO liabilities and as the energy sector resumes normal operations later in the year. Inflation is expected to remain moderate.

Executive Board Assessment

Executive Directors welcomed the signs of economic recovery following a prolonged slowdown, and commended the authorities for implementing supportive policies, aided by ample buffers, which had helped maintain stability. The immediate challenges are to support the recovery and to address remaining financial vulnerabilities. Enhancing competitiveness and promoting economic diversification continue to be important medium-term objectives for Trinidad and Tobago.

Directors supported the 2011/12 budget, which provides stimulus through a timely execution of the budgeted investment programs, while emphasizing the need to contain current spending and improve the targeting of social programs.

Directors recommended developing a medium-term fiscal framework that strikes an appropriate balance between consuming, saving, and investing energy revenue, with a view to resuming net savings of energy wealth for future generations. Containing real increases in transfers and subsidies, strengthening tax collection efforts, and broadening the tax base would facilitate a gradual return to fiscal surpluses and further improve policy buffers. Directors saw scope for clarifying the objectives and operating framework of the Heritage and Stabilization Fund to reflect the preference for savings while maintaining the stabilization component in view of volatile energy prices.

Directors supported maintaining the current low interest rate policy to sustain the nascent economic recovery. They stressed the need for continued strong surveillance of the financial sector. Directors welcomed the intense monitoring and supervision of banks, including through credit reviews and stress testing, and progress toward consolidated supervision. They encouraged further efforts to strengthen the regulatory environment of non-bank institutions and to implement the recommendations of the Financial System Stability Assessment. Directors welcomed the progress toward the resolution of the failed insurance company, and looked forward to its swift completion.

Most Directors supported the staff’s call for further steps to improve the functioning of the foreign exchange market. A few Directors acknowledged the authorities’ concern about greater exchange rate flexibility and its potential impact on competitiveness in the short term. Given depleting energy resources, it will be important to press ahead with structural reform to support diversification by boosting competitiveness in the non-energy sector, fostering a more vigorous private sector, and further enhancing the business environment. Improving the performance of the public administration and delivery of public services will be essential in this regard.

Directors highlighted the urgency of improving the quality and timeliness of statistics. They welcomed the authorities’ plans to create an independent statistical agency and to subscribe to the Special Data Dissemination Standard.

Trinidad and Tobago: Selected Economic Indicators, 2007–12  
          Est. Proj.  
    2007 2008 2009 2010 2011 2012  
(Annual percentage changes, unless otherwise indicated)  

Output and prices


Real GDP

  4.8 2.7 -3.3 0.0 -1.3 1.7  


  1.7 -0.3 2.5 2.0 -2.5 1.0  

Non-energy 1/

  7.0 4.8 -7.1 -1.5 -0.4 2.3  

GDP deflator

  12.8 24.5 -26.6 6.9 10.2 6.6  

Consumer prices (headline)



  7.6 14.5 1.3 13.4 5.3 4.0  


  7.9 12.0 7.0 10.5 5.1 5.4  

Unemployment rate 2/

  5.6 4.6 5.3 5.9 5.8 ...  

Real effective exchange rate (2005=100) 3/

  106.6 113.6 123.7 130.7 128.2 ...  
(In percent of fiscal year GDP, unless otherwise indicated)  

Nonfinancial public sector (NFPS) 4/


Central government overall balance, excluding CLICO support

4.0 7.3 -5.5 0.1 -0.1 -2.5  

CLICO support 5/

  -1.4 -2.6 -0.6 -3.3  

Of which: non-energy balance 6/

  -14.7 -13.4 -19.6 -17.6 -19.6 -20.5  

Budgetary revenue

  30.4 34.3 28.2 33.5 33.2 32.6  

Budgetary expenditure

  26.4 27.0 33.7 33.4 33.3 35.1  

Of which: interest expenditure

  2.0 1.8 2.6 2.5 1.9 2.2  

Of which: capital expenditure

  5.9 5.8 6.2 4.9 4.5 5.0  

Overall statutory bodies balance

  0.3 -0.3 0.0 0.6 0.5 0.4  

Overall public enterprises balance

  -0.7 1.0 -3.4 -4.5 -0.1 -0.8  

Overall NFPS balance

  3.6 8.0 -8.9 -3.8 0.3 -2.9  

Overall NFPS balance including CLICO

  3.6 8.0 -10.3 -6.4 -0.3 -6.2  

Central government debt 7/

  16.2 14.4 15.3 18.6 17.3 21.8  

Public sector debt 7/

  28.9 24.9 30.8 35.9 32.4 37.3  

Heritage and Stabilization Fund

  8.5 11.0 13.6 17.4 18.2 17.6  
(In percent of GDP, unless otherwise indicated)  

External sector


Current account balance

  24.8 30.6 8.2 19.9 21.2 20.0  

Of which


Exports of goods

  61.9 67.0 46.7 53.7 60.8 57.2  

Imports of goods

  35.4 34.5 35.5 31.2 37.5 35.1  

External public sector debt

  6.1 5.3 7.6 6.8 6.8 7.4  

Gross official reserves (in US$ million)

  6,674 9,380 8,652 9,070 9,823 10,028  

In months of goods and NFS imports

  10.0 11.3 14.1 15.8 13.4 13.5  

In percent of M3

  108.9 134.3 96.1 102.1 102.7 104.4  
(Percentage changes in relation to beginning-of-period M3)  

Money and credit


Net foreign assets

  29.7 67.6 -2.2 6.0 14.8 4.3  

Net domestic assets

  -22.3 -53.1 30.3 -6.2 -7.2 -3.9  

Of which: credit to the private sector

  17.6 12.6 -4.0 0.3 3.9 4.6  

Broad money (M3)

  7.4 14.4 28.1 -0.2 7.7 0.4  

M3 velocity

  3.5 4.0 2.2 2.3 2.4 2.6  

Memorandum items:


Nominal GDP (in billions of TT$)

  137.0 175.3 124.4 133.0 144.6 156.8  

Public expenditure (in percent of non-energy GDP)

  52.6 54.7 54.7 57.9 60.1 63.4  

Exchange rate (TT$/US$, end of period)

  6.31 6.34 6.30 6.42 6.40 ...  

Crude oil price (US$/barrel)

  71.1 97.0 61.8 79.0 103.9 105.7  

Natural gas price (US$ per mmbtu) 8/

  7.0 8.9 4.2 4.9 6.5 6.6  

Sources: Trinidad and Tobago authorities, WEO, and IMF staff estimates and projections.

1/ Includes VAT and Financial Intermediation Services Indirectly Measured (FISIM).


2/ For 2011, as of Q2.


3/ For 2011, as of end-October.


4/ The data refer to fiscal year October-September.


5/ In 2011/12, assumes half of CLICO claims are swapped for government equity in Republic Bank.

6/ Defined as non-energy revenue minus expenditure of the central government.


7/ Excluding debt issued for sterilization. Does not include arrears on the fuel subsidy in 2011/12.

8/ Before 2009, Henry Hub price in Louisiana. From 2009, the average of Henry Hub and Asian LNG prices.

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here:


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