Trinidad and Tobago Business Forecast Report Q1 2009

Facing Up To The Global Headwinds

Global financial and economic turbulence reached boiling point in late 2008, leaving many of the Caribbean economies exposed to a number of harsh headwinds. The playing field for energy producers has also changed, with the rapid fall in global commodity prices on the back of broadbased demand destruction. Trinidad & Tobago falls into both the above categories, but in this latest Q1 2009 Business Forecast Report, we argue that the country is better placed than many of its peers to soak up external pressures and bounce back quickly by 2010. Indeed, with real GDP growth forecast at 3.4% and 2.9% in 2008 and 2009 respectively, the island group will continue to outperform the majority of the Caribbean. Nevertheless, a slowing economy will put into focus the sustainability of the current energyfuelled economic model and the perennial issues of crime and poor infrastructure which continue to hamper the country's longterm outlook.

The issue of rising violent crime continues to dominate the political arena and newspaper headlines. We estimate that total murders between January and November 2008 reached 462, far in excess of 2007's fullyear figure of 393 (although we do acknowledge that kidnapping numbers have improved markedly). The administration of Prime Minister Patrick Manning is taking a more serious approach to dealing with the problem, and we expect further financing both internal and external to help contain the problem. Nevertheless, we do not envisage a serious improvement in the crime problem anytime soon, which is a major risk to the country's political scene.

The key economic risk facing Trinidad & Tobago is the potential overestimation of crude oil prices in the 2009 budget. According to the original proposals, which we believe could yet be revised, the government has assumed an average oil price of US$70 per barrel, well above other major crude exporters, such as Nigeria (US$45/bbl) and Venezuela (US$60/bbl). Given BMI's longheld view that Brent crude could fall below US$50/bbl and even head towards US$35/bbl as demand destruction, sustained US dollar strength and volatile financial conditions all weigh on oil prices, the government may have to cut back on some of its planned expenditure plans in 2009.

Trinidad & Tobago's business environment rating of 53.7 puts the country among the leaders in the Latin America and the Caribbean region, and 58th worldwide. The country certainly has a lot going for it in terms of investment appeal: an investment grade credit rating, natural resource richness and decent education standards, to name a few. There is significant scope for improvement, however. The country's supply constraints and infrastructure bottlenecks have been exposed during the surge in global agricultural prices in early 2008. Institutional weakness is also a concern, especially given the spate of highprofile corruption cases in recent years.

• Executive Summary
• Facing Up To The Global Headwinds
• Chapter 1: Political Outlook
  • Swot Analysis
  • Bmi Political Risk Ratings
  • Domestic Politics
  • Bmi On The Ground
  • In MidSeptember 2008, Bmi Travelled To Trinidad & Tobago To Meet With A Host Of Commercial Banks, Government
  • Ministries, And Local Brokers
• List Of Tables
  • Table: Trinidad & Tobago: Political Overview
  • Foreign Policy
  • Mannings Plans Not Without Sceptics
  • Proposals To Establish Political And Economic Union Between Trinidad & Tobago And Three Members Of The
  • Organisation Of Eastern Caribbean States (Oecs) Has Ruffled Feathers Across The Region, Most Notably In
  • Jamaica And Belize
  • Chapter 2: Economic Outlook
    • Swot Analysis
    • Bmi Economic Risk Ratings
    • Economic Activity
    • The Inevitable Slowdown Underway
    • Trinidad & Tobago Is Set To Post Its Worst Rates Of Economic Expansion In A Decade In 2008 And 2009, With Real Gdp
    • Growth Forecast To Come In At 3.5% And 2.9% Respectively
• List Of Tables
  • Table: Economic Activity
  • Balance Of Payments
  • External Dynamics Deteriorating
  • Trinidad & Tobagos External Outlook Will Continue To Dull In 2009, As The Retreat In Global Commodity Prices,
  • Sluggish Fdi Inflows, And A Tightening Of American Consumer Purse Strings All Weigh On The Countrys Balance
  • Of Payments
• List Of Tables
  • Table: Balance Of Payments
  • Fiscal Policy
  • Challenges Ahead To Maintain Fiscal Surplus
  • Trinidad & Tobagos Fiscal Accounts Will Remain In The Black In 2009 (At A Projected 1.8% Of Gdp), Although
  • Declining Oil Revenues Could Force The Government To Keep A Tighter Rein On Public Spending
  • Table: Fiscal Policy
  • Monetary Policy
  • From Monetary Tightening To Easing
  • Inflationary Pressures In Trinidad & Tobago Have Proved More Stubborn Than Previously Expected Due To Local Supply
  • Constraints And Net Fiscal Injections, But We Still Expect To See A Moderation In Headline Price Growth Over The
  • Coming Months
• List Of Tables
  • Table: Monetary Policy
  • Debt Policy
  • Solid Despite Turmoil
  • Trinidad & Tobago Will Remain One Of The Strongest Sovereign Credits In The Latin American Region, Largely Thanks
  • To The Impressive Fiscal And Foreign Reserve Arsenal Built Up In Recent Years, As Well As The Trimming Down Of Public
  • External Debt Liabilities To Around 67% Of Gdp
• List Of Tables
  • Table: Foreign Debt
  • Chapter 3: 10Year Forecast
    • The Trinidad & Tobago Economy To 2018
    • Economic Prospects Looking Good
    • In Terms Of Economic Growth And Development, Natural ResourceRich Trinidad & Tobago Should Remain The Caribbean
    • Standard Bearer Over The Next Decade
• List Of Tables
  • Table: Trinidad & Tobago LongTerm Macroeconomic Forecasts
  • Chapter 4: Special Report
    • Why The Us Can Remain World Superpower
    • Wealth Is Shifting East
    • The Uss Current Financial Woes Will Not Necessarily Undermine Its Position As A Global Superpower
• List Of Tables
  • Table: Geopolitical Power Index
  • Chapter 5: Business Environment
    • Swot Analysis
    • Bmi Business Environment Risk Ratings
    • Business Environment Outlook
• List Of Tables
  • Table: Bmi Business And Operational Risk Ratings
  • Institutions
• List Of Tables
  • Table: Bmi Legal Framework Ratings
  • Infrastructure
• List Of Tables
  • Table: Labour Force Quality
  • Market Orientation
• List Of Tables
  • Table: Latin America Annual Fdi Inflows
  • Table: Bmi Trade Ratings
  • Operational Risk
• List Of Tables
  • Table: Trinidad & Tobago Top Export Destinations
  • Chapter 6: Bmi Global Assumptions
    • Global
• List Of Tables
  • Table: Global Assumptions
  • United States
  • Eurozone
  • Japan
  • China
  • Commodities