Moody’s Investors Service has reaffirmed Trinidad and Tobago’s Baa1 sovereign credit rating based on relatively high income levels, driven by the country’s large and diversified energy sector, Finance Minister Larry Howai said in a release yesterday.
Howai said Moody’s also based its evaluation on the expansion of the economy which, the analysts identified, was mainly due to the performance of the non-energy sector, given the significant maintenance work that had to be done in the energy sector over the past year.
This expansion, Howai said, had been driven, to a large extent, by an aggressive fiscal stimulus programme which was complemented by an accommodative monetary policy stance.
The Moody’s report stated the T&T economy was expected to maintain a positive momentum into 2014, and forecast growth of 2.9 per cent in 2014, “further picking up to 3.2 per cent in 2015, driven by increased exploration activity and foreign investment in the energy sector, as well as, public infrastructure projects”.
Moody’s noted, too, “the sovereign credit profile also benefits from a moderate and affordable debt burden and a very strong external position anchored by a sizeable foreign exchange reserves buffer”.
The organisation classified Trinidad and Tobago’s strength as “Very High” due to its relatively moderate debt burden and comparatively high debt affordability.
Moody’s cited the Government’s balance sheet, which includes the country’s Heritage and Stabilisation Fund, as “a core financial institution to manage oil sector revenues” that has accumulated a balance in excess of 20 per cent of Gross Domestic Product, and was one of the factors that had contributed to the reaffirmation of the positive credit rating, Howai said.
The minister said the rating confirmation underlined “the success of the continuing efforts of the Government to improve the quality of life for citizens, transform the economy, create new jobs and provide improved services without deteriorating the country’s fiscal metrics”.
Regarding the downside risks identified by Moody’s, Howai said: “I am fully cognizant of the issues raised by Moody’s on the fact that the economy remains highly dependent on the energy sector and the existence of infrastructure deficiencies as well as competitiveness challenges. We have commenced the process of bringing the fiscal accounts into balance and will close that gap further this year. In addition, we continue to focus on the deficiencies in our physical infrastructure as well as on the creation of a well diversified, knowledge-based economy.
“As such, we continue our programme of physical upgrades to the nation’s infrastructure and are in aggressive pursuit of a portfolio of structural reforms that preserve fiscal sustainability, promote business competitiveness and provide appropriately supportive regulatory environments.”
He said, regarding the latter, the Government has prioritised a number of structural reforms to foster economic growth and promote economic diversification and business competitiveness.
The Government’s structural reform agenda has revolved around pension reform, doing business reform, public debt and cash management, investment promotion and the development of special economic zones, institutionalising public private partnerships and a national broadband strategy, he said.
Moody’s Investors Service’s assessment of the performance of the Trinidad and Tobago economy was conducted at the beginning of this month.
Moody’s Investors Service is an international agency that provides credit ratings, research and risk analysis to its clients.