Trinidad and Tobago suffered a major blow to its status as the place to invest in the Caribbean after international agency Moody’s downgraded the country’s credit rating from stable to negative.
Last week Moody downgraded Trinidad and Tobago’s government bond rating and issuer rating from Baa1 to Baa2.
The rating are used and considered by international investors looking to do business in T&T.
Moody’s justification for the downgrade are:
Persistent fiscal deficits and challenging prospects for fiscal reforms.
Decline in oil prices and limited economic, diversification to weigh negatively on economic growth prospects.
Weak macroeconomic policy framework given lack of a medium-term fiscal strategy; and inadequate provision of vital macroeconomic data.
Moody’s also downgraded two state energy companies — the National Gas Company (NGC) and the Petroleum Company of Trinidad and Tobago (Petrotrin) because of the high dependency on the companies by the government.
The international agency noted that since 2009 there has been recurring deficit, on the order of two to three percent of GDP after consecutive surpluses were observed over the previous eight years.
Moody’s also said T&T remained heavily reliant on oil and gas, so its economic activity and fiscal stability was predicated on the performance of that sector.
“We anticipate that maturing oil and gas fields will limit Trinidad’s prospects of significantly increased hydrocarbon revenues in the medium-term. A return to higher pre-crisis growth rates is unlikely, a condition we think will be aggravated in the context of low energy prices. Given this, we project GDP growth will rebound to less than two percent in the medium term,” the rating agency said.
Responding to the downgrade, the Central Bank said in a statement it is unjustified.
The bank said T&T remains an investment-grade destination that is able to meet its debt obligations.
And despite Moody’s expressed concern about oil prices and T&T’s dependency on them, the bank said T&T would continue “experiencing healthy current account surpluses and strong foreign direct investment flows mainly to the energy sector, despite the sharp downturn in oil prices.”
Opposition Leader Dr. Keith Rowley said the People’s Partnership (PP) government should accept “personal and direct” blame for Moody’s downgrade of T&T.
He said the opposition had been demanding for several months that the government “come clean with the population.”
According to Rowley, the Moody’s downgrade was due to the continuous budget deficit with no plan by the government to deal with it.”
“This government has run a deficit in every single budget, spending more than we were earning and there was no plan to change that,” he said.