Apr 2018 Financial News

S&P Global Ratings revised its outlook on the Republic of Trinidad and Tobago

Apr 27, 2018

S&P Global Overview

• We expect the Republic of Trinidad and Tobago's macroeconomic and external imbalances to persist over the next two years, which will weaken the country's net external asset position.
   
• Nevertheless, expected fiscal consolidation and sizable government assets will continue to support creditworthiness.
   
• We are revising our outlook on Trinidad and Tobago to negative from stable and affirming our ratings, including our 'BBB+' long-term sovereign credit rating, on the country.
   
• The negative outlook incorporates the risks that these imbalances may deplete Trinidad and Tobago's external assets faster than expected, or weaken the effectiveness of monetary policy.
   
• The outlook further reflects the risks of slower-than-expected fiscal consolidation or institutional reform.
   

Rating Action

S&P Global Ratings revised its outlook on the Republic of Trinidad and Tobago to negative from stable. At the same time, S&P Global Ratings affirmed its 'BBB+/A-2' long- and short-term foreign and local currency sovereign credit ratings on Trinidad and Tobago. S&P Global Ratings also affirmed its 'A' transfer and convertibility assessment on the country.

Rationale

The ratings on Trinidad and Tobago reflect the country's solid level of financial assets that serve to mitigate the effect of economic cycles on its fiscal and external performance. The country accumulated savings over the past decade that stabilize performance in the face of fluctuating commodity prices.

This is particularly relevant for Trinidad and Tobago, given the economy's concentration in the energy sector, which represents about one-fifth of GDP, a third of government revenues, and nearly 80% of exports.

Nevertheless, the energy sector's strong downturn over the past several years and the limited effectiveness of policy response--particularly given the combination of a heavily managed exchange rate and a small open economy that we believe effectively limits the role of monetary policy--pose risks to the country's ability to respond to shocks.


Source:
Standard & Poor's Credit Research
Friday April 27th 2018