While the agency maintained the country’s economic outlook as stable, it said the change was based on Trinidad and Tobago’s higher debt burden.
It added that at the same time it was affirming its “A-2” short term sovereign credit ratings and lowering its transfer and convertibility assessment to ‘A’ from ‘AA-’.
In a statement, the Ministry of Finance said that 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 (gross domestic product) ratio between 2014 and 2015 was largely attributable to significant downward revisions by the CSO (Central Statistical Office) of the nominal GDP for those years.
“The CSO’s estimate for 2014 was revised down from TT$174,756.9 million (One TT dollar =US$0.16 cents) to TT$167,764.3 million, and its estimate for 2015 was reduced from TT$165,286.1 million to TT$150,246.6 million.”
The Ministry of Finance said that 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 government said that its current 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.”
It said that S&P also noted that there was a decline in inflation to around three per cent 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 per cent of current account receipts during 2017-2020 with public external debt remaining low, despite the global bond issue of one billion US dollars in July 2016.”
The Keith Rowley government said that 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 TT$5.5 billion representing 25 per cent 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,” it noted.
Last weekend, the Bankers Association of TT (BATT) said the latest S&P’s rating makes the need for proposals for economic diversification and growth of “paramount importance.”
The BATT said the discussions for proposals to debate economic diversification and growth proposals between Government and private sector associations are also essential with Government soon to release its 2016/2017 Mid-Year Review and as it prepares the 2017/2018 budget.
Government has said that the review will be presented sometime in the first half of May.
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