Finance Ministry: 'Stable' outlook reflects S&P’s belief in current economic policies

Tuesday, April 25, 2017 - 08:30

The Ministry of Finance says the "stable" outlook that Standard and Poors has given this country, reflects a belief that the current economic policies employed by the Government are working.

The Ministry says fiscal and monetary policy adjustments also contributed to the stable outlook.

The Ministry issued the following statement Tuesday morning:

"On April 21, 2017, Standard and Poor’s (S&P) lowered its long-term sovereign credit ratings for the Republic of Trinidad and Tobago from “A-” to “BBB+”.

While maintaining the Republic’s Investment Grade Rating, the Agency also revised the outlook for the economy from “negative” to “stable” and affirmed the country’s ‘A- 2’ short-term sovereign credit ratings.

While S&P cites the increased debt burden as one factor in the lowering of the country’s long-term credit rating, it is important to note that the significant increase in the debt to GDP ratio between 2014 and 2015 was largely attributable to significant downward revisions by the CSO of the nominal GDP for those years.

The CSO’s estimate for 2014 was revised down from $174,756.9 million to $167,764.3 million, and its estimate for 2015 was reduced from $165,286.1 million to $150,246.6 million.

These revisions were deemed necessary on account of downward adjustments of the originally projected values of the output of energy companies following the sudden collapse of international energy prices in late 2014 and again in 2015.

The “stable” outlook is reflective of S&P’s belief that current economic policies, including deficit reduction and stabilization of the debt burden, will result in modest economic recovery over the medium term period 2017 to 2020.

The current Administration’s fiscal and monetary policy adjustments, along with exchange rate policies, in the midst of less than favourable economic conditions, also attributed to the ‘stable outlook’.

Furthermore, taking into consideration, the Government’s commitment to attracting foreign investment to the energy sector and fiscal consolidation along with the continuing economic policies, S&P projects that the debt burden will stabilize over the next two years.

S&P also noted that there was a decline in inflation to around 3% at the end of 2016. They also expect that, in spite of the economic challenges, the local banking sector will remain profitable, well-capitalised and highly liquid.

The report further states that it is anticipated that the country will maintain an average net external asset of 105% of current account receipts during 2017-2020 with public external debt remaining low, despite the global bond issue of US $1B in July 2016.

The country’s stable outlook is also based on the substantial financial buffers of more than adequate international reserves and a Heritage and Stabilization Fund of $5.5 billion representing 25% of GDP. Provisional liabilities from the financial sector and non-financial public enterprises such as, National Gas Co. of Trinidad and Tobago and Petrotin have been assessed as limited."