The United States debt crisis, its credit rating downgrade and the negative economic fallout signal danger not only for the US, but are also likely to have a direct impact on Trinidad and Tobago's attempts to resuscitate its economy.

Prime Minister Kamla Persad-Bissessar and Minister of Finance Winston Dookeran have argued that 2011 will bring economic growth following two years of decline.

In 2009 the economy declined by 3.5 per cent and in 2010 by 0.6 per cent.

Central Bank Governor Ewart Williams in his presentation of the Economic Bulletin for July last Monday said the US troubles have presented yet another hurdle in the achievement of real GDP growth.

Williams began the year with predictions of growth in 2011 of between two to three per cent.

These numbers have now been revised to 1.2 per cent.

And the realisation of this growth hinges in part on the severity of the uncertainty that is now prevalent both here and abroad.

Williams said the current crisis has come at the worst possible time and coupled with the current fragile state of our own business confidence it could diminish hopes of climbing out of the current decline.

He said: "We need to wait and see whether what is happening in the US and in Europe will also drop a dampening over economic perception and behaviour in Trinidad and Tobago. If that happens, if we have behaviour similar to what happened in 2009, any hope of a resurgence could be further delayed.

We should remember that following the international recession GDP growth declined by three per cent in 2009 and continued to decline by 2010, all this to mean that all this certainly has impact for what is happening in Trinidad and Tobago."

It's not just intangible investor confidence that is at risk with this new economic storm but our major revenue earner is set to take impact as well.

Last week Dookeran warned that there were serious implications for our earnings because of the rumblings in the markets.

He said, "Already the price of oil has dropped to somewhere in the range of US$80 and may be falling and the price of gas itself has dropped to a level of over US$3, both of which will have significant implications for our revenue intake both for the future and certainly for the present."

Economist Hayden Blades says a reduction in these earnings will also impact the stability of our currency.

"If we have to live with relatively lower crude oil and natural gas prices then our foreign exchange earnings will be another area of earnings of immediate concern. Unless we find a way to either reduce our import demand and replace that with domestic production we are going to be struggling with maintaining a relatively stable TT dollar versus the US dollar," he told the Business Express during a telephone interview last Friday.

Former minister in the Ministry of Finance, Mariano Browne believes that given all that is happening, the US dollar will continue its downward slide and will carry much of the world's wealth reserves with it.

Already the Central Bank has suggested that money from the Heritage and Stabilisation Fund is at risk because of the unpredictable level of variance on the global and US markets and that we may incur some losses in this invested sum.

Blades says if the US dollar continues to weaken this will also increase our import bill from non-US countries.

"The US dollar has weakened against currencies such as the Japanese Yen as well as other Asian currencies which means that everything that we import from those countries will now automatically be more expensive to us," he said.

Our TT dollar exchange rate is determined with the rest of the world via the US rate of currencies. We don't have an independent TT rate with regard to the Yen or the Pound or the Canadian Dollar. Our TT dollar rate relative to those non-US currencies is dependent on the US dollar rate."

While our economic fate, like much of the world, seems inextricably tied to the US economy there are measures that can be implemented to reduce our dependence.

Blades said, "Delinking the TT dollar from the US dollar is not the solution for us what we have to do is to delink our dependence on North American and European markets for the sale of our goods and services and work much harder to find new markets in Asia, China, Korea, India in Africa in South America in our own backyard in Central America."

"So we have a lot of work to do in terms of creating new bilateral arrangements, enhancing existing ones and working much harder to get our private sector positioned in these markets."

Meanwhile Central Bank Governor Williams believes the US situation should act as a prompt for us to put our own financial house in order.

"Our low debt burden should not put us into a false sense of complacency ... the projection is for a sizeable deficit in this fiscal year and if the deficit is what is expected then that will result in an increase in public debt by two or three percentage points," Williams said.

"We still have to account for the fiscal cost of the CLICO bailout and that could add billions to our public debt. It is possible that by the end of the year we can end up with a public debt to GDP ratio of closer to 50 per cent of GDP."

In order to avoid the trend of increasing debt, Williams said the Government must begin to decrease the deficit.

Economist Blades believes a two-pronged approach to this problem is needed.

He suggested among other things that the government must become more efficient in its tax collection while looking for efficient ways to reduce subsidies.