CariCRIS reaffirms “high creditworthiness” ratings for the Government of The Republic of Trinidad and Tobago

CariAA+ (Regional Scale Foreign Currency)

CariAA+ (Regional Scale Local Currency)

ttAAA (Trinidad & Tobago National Scale)

Caribbean Information and Credit Rating Services Limited (CariCRIS) has reaffirmed its ratings of CariAA+ (Foreign and Local Currency Ratings) on its regional rating scale for the USD 500 million debt issue (notional) of the Government of The Republic of Trinidad and Tobago (GORTT). These ratings indicate that the level of creditworthiness of this notional obligation, adjudged in relation to other obligations in the Caribbean, is high. CariCRIS has also revised the outlook on the ratings to negative from stable.

The factors supporting the reaffirmation of the Ratings are: (1) Trinidad and Tobago continues to be one of the largest and most diversified economies in the Caribbean, which provides a level of resilience in economic performance during difficult times, (2) the financial system continues to be well-regulated with relatively stable monetary conditions and exchange rate performance, and (3) Trinidad and Tobago retains comfortable debt service coverage when compared to its Caribbean peers, despite some deterioration.

These rating strengths are tempered by the following factors: (1) balance of payments deficits continue due to softer commodity prices in recent years, (2) a significant fiscal deficit is projected for FY2019/20, despite good fiscal restraint shown over the past 3 years, (3) social instability persists, worsened by rising unemployment and heightened crime levels, and (4) the continued lack of reliable macroeconomic data hampers efforts to strengthen the economy and improve revenue collection.

Our decision to revise the outlook on the ratings to negative from stable is based on uncertainty of a return to sufficient economic growth in 2021 and over the medium-term. The COVID-19 pandemic brought a sudden stop to domestic activity in Q1 2020 and necessitated an increase in government spending and borrowings. The pandemic also in part caused a collapse in energy prices. Downside risks to economic recovery in 2021 and a reversal of COVID-19’s other macroeconomic impacts over the medium-term include: a prolonged “L” shaped global recovery with negative implications for energy prices, weakness in demand from regional markets and a second-wave of virus transmission. 

Rating Sensitivity Factors

Factors that could lead to an improvement in the Ratings/Outlook include:

• A decrease in the total public sector debt to below 65% of GDP

• An improvement in debt servicing capability to above 7 times

• A fiscal surplus in excess of 3% of GDP sustained over 2 consecutive years

• A rise in the import cover to 12 months or more

Factors that could lead to a lowering of the Ratings/Outlook include:

• An increase in the total public sector debt to above 86% of GDP over the next 12 months

• A sustained deterioration in debt servicing capability to below 4 times over 2 consecutive years

• A fiscal deficit in excess of 8% of GDP sustained over 2 consecutive years

• A fall in the import cover to 6 months or less over the next 12 months

ABOUT THE SOVEREIGN

Trinidad and Tobago (T&T) are the two southernmost islands of the Caribbean chain and lie just seven miles off the north-eastern coast of Venezuela. The islands are outside of the usual path of hurricanes and have largely been spared the annual devastation that some of their northern neighbours have endured from storms and weather-related troughs. The population, estimated to be 1.41 million people, comprises descendants of primarily India and Africa. The reported adult literacy rate is above 98 per cent2 and education is free up to the secondary school level, with significant subsidization of tertiary education. The official language is English. 

The expansion of T&T’s oil industry in the 1950s moved the country from a sugar-based to an energy-based economy. The vast petroleum and natural gas reserves have enabled the country to develop downstream industries such as the production of liquefied natural gas, methanol and nitrogenous fertilizers. The country also has strong financial services, manufacturing, and wholesale & retail distribution sectors. Tourism is a growing sector in the economy.

For more information on the Government of the Republic of Trinidad & Tobago’s ratings, please visit www.caricris.com or contact:

André Joseph Senior Manager, Ratings Tel: 1-868-627-8879 Ext. 224 E-mail: ajoseph@caricris.com 

OR

Stefan Fortuné  Manager, Ratings, Research & Training Tel: 1-868-627-8879 Ext. 228 E-mail: sfortune@caricris.com

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