Question

Explain how the Trinidad and Tobago economy fell into a depression over the past 5 years. ( exclude the effects of the current pandemic )

Answer 1

Trinidad and Tobago’s economic recession persisted in 2017, with growth estimated at - 2.3%. The growth remained subdued in the period 2018 to 2019 as well.

Despite a slight increase in energy revenue, the budget deficit for fiscal 2017 is estimated at 8.4% of GDP up from 5.5% in fiscal 2016, while net public debt had already risen to 62.6% of GDP by September 2017. The total current revenue fell from 28.2% of GDP in fiscal 2016 to 23.9% of GDP in fiscal 2017.

In 2019, the overall tax burden equals 22.2 percent of total domestic income. Government spending has amounted to 33.4 percent of the country’s output (GDP) over the past three years, and budget deficits have averaged 9.7 percent of GDP. Public debt is equivalent to 45.3 percent of GDP.

Thus, the situation has not improved in the last 5 years. Most of the country's resource is used in paying-off debt obligations, with minimal thrust on economic activity, thereby causing economic growth to sail in negative territory.

Total expenditure fell from 36.3% of GDP in fiscal 2016 to 33.4% in fiscal 2017.

Year-on-year growth in private sector lending remained restrained in 2017

The weak economic activity was reflected in sluggish private sector lending growth and low inflation. Growth is projected to come to 0.5% in 2018

The Trinidad and Tobago economy contracted by 2.3% in 2017, which is still an improvement over the 6% contraction seen in 2016. After shrinking by 13.2% in 2016, the mining and quarrying sector is expected to contract by 2.2% and to contribute -0.43 percentage points to economic growth owing to declines in crude oil output. The decline in crude oil production along with the largest contraction in the trade and repairs sector by 9.4% contributes -1.59 percentage points to growth. Oil production has declined over the past decade in general as the country has focused on natural gas.

The wholesale and retail trade subsector has been severely affected by weaker private consumption in the current recession.

Trinidad and Tobago’s economic freedom score is 58.3, making its economy the 109th freest in the 2020 Index.

The economy of Trinidad and Tobago fell from the ranks of the moderately free in 2018 and remains in the mostly unfree category in 2020. Economic growth has been correspondingly slow.

Two events in 2019 highlight the impediments to greater economic freedom in Trinidad and Tobago. The minister for public administration was dismissed in mid-August following her arrest on corruption charges. That was a blow to an already weak reputation for government integrity. In addition, a mid-year budget review for the fiscal year 2018–2019 projected a wider fiscal deficit, which will likely further erode the country’s already poor fiscal health.