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World > North America > Trinidad and Tobago > Economy (Notes)

Trinidad and Tobago - Economy (Notes)


ECONOMY
The twin-island nation of Trinidad and Tobago continues to experience real GDP growth as a result of economic reforms, tight monetary policy, fiscal responsibility, and high oil prices. In 2006 the country experienced a real GDP growth rate of 12%, which followed 8% growth in 2005. The PNM-led government continues its sound macroeconomic policies. Long-term growth looks promising, as Trinidad and Tobago further develops its oil and gas resources and the industries dependent on natural gas, including petrochemicals, fertilizers, iron/steel and aluminum. Additional growth potential also exists in financial services, telecommunications and transport. Strong growth in Trinidad and Tobago over the past few years has led to trade surpluses, even with high import levels due to industrial expansion and increased consumer demand. The debt service ratio, was a moderate 4.7% in 2004, and fell to 2.5% in 2005. In 2006, unemployment fell to 5% down from 6.7% in 2005. Headline inflation peaked at 10% (year-on-yar) in October 2006, then moderating to 8.0% as of March 2007. Food price inflation slowed to 18.8% (year-on-year) in March 2007, down from 22% in October 2006. During 2006, the Central Bank has raised interest rates eight times for the year. However, since September 2006, the Bank has maintained the rate at 8.0%. There are no currency or capital controls and the central bank maintains the TT dollar in a lightly managed, stable float against the U.S. dollar. The exchange rate as of May 10, 2007, was TT $6.31 to U.S. $1.

Trinidad and Tobago has made a transition from an oil-based economy to one based on natural gas. In 2006, natural gas production averaged 4000 million standard cubic feet per day (mmscf/d), compared with 3200 mmscf/d in 2005.The petrochemical sector, including plants producing methanol, ammonia, urea, and natural gas liquids, has continued to grow in line with natural gas production, which continues to expand and should meet the needs of new industrial plants coming on stream in the next few years, including iron, aluminum, and ethylene. In December 2005, the Atlantic LNG fourth production module or 'train' for liquefied natural gas (LNG) began production. Train 4 has increased Atlantic LNG's overall output capacity by almost 50% and is among the largest LNG trains in the world at 5.2 million tons/year of LNG. Trinidad and Tobago is the fifth-largest exporter of LNG in the world and the single largest supplier of LNG to the U.S., supplying 70% of all LNG imported into the U.S. The energy sector experienced strong growth in 2006, estimated at 20.6%, and accounted for 41.5% of GDP at that year's end.

Growth across the non-energy sector in 2006 slowed to 6.5%, down from 8.7% in 2005. Manufacturing was the most dynamic, with 11.8% growth in 2006, led for the third consecutive year by food, beverages and tobacco (19%), and assembly-type industries (11.1%). The services sector grew by 5.9%, led by construction sector growth resulting from Trinidad and Tobago Government investment in housing and infrastructure, and ongoing projects in the energy sector. Performance in the agriculture sector has been erratic and weak, with a 0.6% decline in output resulting largely from the shrinking and restructuring of the sugar industry. The government is seeking to diversify the economy to reduce dependence on the energy sector and to achieve self-sustaining growth. The diversification strategy focuses on seven key industries: yachting; fish and fish processing; merchant marine; music and entertainment; film; food and beverage; and printing and packaging. A National Research and Development Fund will be established to stimulate innovation and investment in a technology park, to be constructed.

Trinidad and Tobago has an open investment climate. Since 1992, almost all investment barriers have been eliminated. The government continues to welcome foreign investors. The government has a double taxation agreement, a bilateral investment treaty and an intellectual property rights agreement with the United States. The stock of U.S. direct investment in Trinidad and Tobago was $1.98 billion as of 2005. Total foreign direct investment inflows average $700 million annually over the last decade. Among recent and ongoing investment projects are several involving U.S. firms: ISG Trinidad started operations in November 2004 in a plant that has the capacity to produce 500,000 metric tons annually of hot briquetted iron. In December 2006 Nucor began producing direct reduced iron for shipment to the U.S. at its plant in Trinidad, which has a production capacity of 2.0 million tons per year. Two aluminum smelter plants are also planned, one of them to be owned by Alcoa. The first major business-class hotel to be opened in several years bears the Marriott Courtyard brand. A Hyatt-managed hotel is scheduled to open in late 2007, part of a multimillion-dollar port development project in Port of Spain.

Trinidad and Tobago's infrastructure is adequate by regional standards. Expansion of the Crown Point airport on Tobago is being planned, which follows opening of the Piarco terminal on Trinidad in 2000. There is an extensive network of paved roads. Traffic is a worsening problem throughout Trinidad, as the road network is not well suited to the volume of vehicles and only a rudimentary mass transport system exists as an alternative. Utilities are fairly reliable in cities, but some rural areas suffer from power failures, water shortages in the dry season, and flooding in the rainy season due to inadequate drainage. Infrastructure improvement is one of the government's budget priorities, especially rehabilitating rural roads and bridges, rural electrification, flood control, and improved drainage and sewerage. The government is evaluating bids to construct a light rail system and is expected to award a contract for the design and planning phase of the project in mid-2007.

Telephone service is modern and fairly reliable, although significantly more costly to consumers than comparable U.S. service, including for wireline, wireless, and broadband services. Change began in the wireless market when the new Telecommunications Authority invited two firms to offer competition to state-owned monopoly incumbent TSTT (co-owned by Cable & Wireless). Two wireless providers, Bmobile and Digicel are already operational, while a third licensee, Laqtel, had not launched service as of May 2007. Long distance, cable, and Internet services have not yet been deregulated, but the government has indicated that it will do so in those markets as well, beginning with cable TV. Internet has come into widespread use, with broadband access available in upscale business and residential areas, along with a number of wireless 'hot spots.' Improvements in service and price are likely as TSTT prepares itself to meet competition for Internet services in coming years.


Facts at a Glance: Geography - People - Government - Economy - Communications - Transportation - Military - Climate - Current Time - Ranking Positions - Trinidad and Tobago Dollar Exchange Rates
Notes and Commentary: People - Economy - Government and Political Conditions - Foreign Relations - Relations with U.S.



Facts at a Glance
Geography
People
Government
Economy
Communications
Transportation
Military
Climate
Current Time
Ranking Positions
Trinidad and Tobago Dollar Exchange Rates


Notes and Commentary
People
Economy
Government and Political Conditions
Foreign Relations
Relations with U.S.





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