Country Report Trinidad and Tobago June 2008

Outlook for 2008-09

• The parliamentary majority enjoyed by the government of the People’s National Movement (PNM) will enable it to enact most of its legislative agenda during the outlook period.
• A priority will be tackling spiralling violent crime, one of the government’s most challenging major policy objectives, through increased investment in police training and equipment.
• The government will continue to record fiscal surpluses, driven by the dynamism of the export-oriented energy sector, but these will fall as government spending rises.
• Stronger activity in the energy sector will drive a renewed acceleration of growth in 2008-09, as well as supporting large trade and current-account surpluses.
• Fuelled by higher global food prices and rising levels of capital spending, inflation will remain high during the outlook period, ending 2008 at 10.1% before easing to 7.9% by end-2009.
• The exchange rate will remain around its quasi-fixed level of TT$6.3:US$1 throughout the forecast period.

Monthly review

• A commission of inquiry is being formed to investigate the Urban Development Corporation (Udecott), a special-purpose state enterprise. However, the commission has been the focus of political infighting.
• The high rate of violent crime remains a prime concern, with 204 murders (mostly gang-related) committed in the first five months of the year.
• Central Bank efforts to reduce inflation through tightening policy have started to have an effect, although credit growth remains high.
• Consumer price inflation moderated slightly in April, but remained high at 9.3%. Core inflation fell to 5.2% in April after remaining around 5.7% since the beginning of the year, but remains at historically high levels.
• The unemployment rate fell its lowest recorded level in 2007, falling from 6.2% in 2006 to just 4.5% at end-2007; together with high inflation, this has led to rising wage pressures in the early months of 2008.
• The Trinidad subsidiary of British Petroleum, BPTT, will invest at least US$4bn over the next five years to maintain its current levels of natural gas output. BPTT is responsible for 55% of Trinidad and Tobago's natural gas production.