FINANCE Minister Colm Imbert said S&P Global Rating’s decision to revise the outlook for the T&T economy to stable from negative “singles Trinidad and Tobago very favorably, both regionally and globally”, and that means that this country “is a safe haven for investors”.
Imbert was commenting on S&P’s July 21 rating, in which the international rating agency revised T&T’s outlook from negative to stable and affirmed its ratings, including long-term sovereign credit rating “BBB-“, on the country.
On the issue of T&T’s outlook, S&P said, “The stable outlook indicates that we believe Trinidad and Tobago will benefit from significantly higher energy and petrochemical prices, which will more than offset energy production lower than expected.
“We believe higher prices will drive improved incomes and stronger than expected government revenue collection, which will help stem rising public debt.”
On the issue of the country’s investment rating affirmation, S&P said, “The ratings reflect the favorable external profile and stability of Trinidad and Tobago’s democracy.
“They also reflect still strong public financial assets that mitigate the effect of economic cycles on fiscal and external performance. Over the past 15 years, the country has accumulated savings that have stabilized the economy in the face of downturns. This is particularly relevant for Trinidad and Tobago, as the volatile energy sector has accounted for more than a quarter of GDP and government revenue, and nearly 80% of exports, on average, over the past five years.
But S&P also pointed to the limits of the country’s ability to handle potential future economic shocks.
The ratings agency said: “Nevertheless, the mature energy sector, with declining gas production in recent years and lower-than-expected oil production, as well as limited monetary policy flexibility and a highly controlled exchange rate, limit the country’s ability to respond to potential future shocks, in our view.Our ratings also reflect poor long-term economic performance, with per capita income growth below the average of sovereign states with similar income levels.
In his press release on S&P’s rating action yesterday, Imbert said, “This is the first time in the past 15 years that S&P has taken positive action on Trinidad and Tobago.
“In the current situation of the global economy, with multiple instances of economic and financial distress, negative rating actions are the norm rather than the exception: this sets Trinidad and Tobago very favorably, both regionally and Trinidad and Tobago is a safe haven for investors.”
Imbert said S&P’s rating decision “is a testament to our country’s ability to weather the Covid-19 crisis in a way that protects people and the economy, and to exceed expectations in terms of growth and fiscal restraint, resulting in a lower public debt trajectory.
He said he was confident “that the new dynamics in our credit rating will translate into improvements as we maintain the course of fiscal discipline and renewed growth.”
S&P said it could upgrade T&T’s rating over the next 24 months “if stronger economic performance and favorable long-term GDP growth prospects lead to a sustained decline in public debt and ease external pressures.” .