The twin-island nation of Trinidad and Tobago experienced 16 consecutive years of real GDP growth through 2008 as a result of economic reforms adopted in the early 1990s, tight monetary policy and, until recently, buoyant markets for its export commodities. In 2007, the country experienced a real GDP growth rate of 5.5%. This moderated to 3.5% in 2008, with the country experiencing negative growth in the last quarter of 2008 and the first quarter of 2009 as export commodity prices fell in response to recessions in developed country markets.
The PNM-led government has largely avoided deficit spending in recent years, but a high non-energy fiscal deficit raises concerns for long-term sustainability, while rapid increases in infrastructure and recurrent spending have contributed to rising inflation. Falling prices for the country's major export commodities led the government to announce cuts in spending for fiscal year 2009, and the budget has gone into deficit. Long-term growth prospects nevertheless remain 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 1.7% in 2008, up from 1.1% in 2007 but still below the 2006 level of 2.3%. Unemployment stood at 3.9% in the fourth quarter of 2008, and rose to 5% in the first quarter of 2009. An unemployment rate of 6%-7% is projected for 2009. Headline inflation crossed into double digits in May 2008, registering 14.3% (year-on-year) at the end of November. In an effort to contain inflation, the Central Bank repeatedly raised interest rates and reserve requirements, while issuing bonds to mop up excess liquidity. Latest inflation figures show a drop to under 10% (year-on-year). 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. During 2008, the exchange rate fluctuated between TT$6.1573 and TT$6.3573 to U.S. $1. The rate as of August 26, 2009 was TT$6.3401 to U.S. $1 (selling rate).
Trinidad and Tobago has made a transition from an oil-based economy to one based on natural gas. Natural gas production over the period October 2007 through April 2008 was 115.2 million cubic meters per day, up from 111.9 million cubic meters per day over the same period in 2006-2007. About half of the country's natural gas production is converted into liquefied natural gas (LNG) at the Atlantic LNG facility in Trinidad and exported under long-term contracts and on the spot market. Trinidad and Tobago is the fifth-largest exporter of LNG in the world and the single largest supplier of LNG to the U.S., providing two-thirds of all LNG imported into the U.S. since 2002. Natural gas production continues to expand and should meet the needs of new industrial plants coming on stream over the next few years, including iron, aluminum, ethylene, and propylene. The petrochemical sector includes plants producing methanol, ammonia, urea, and natural gas liquids; after steady growth in recent years, this sector more than any other felt the impact of a global economic slowdown in late 2008. A number of plants responded with temporary shutdowns.
Growth in the non-energy sector was projected to slow from 7.7% in 2007 to 4.8% in 2008. The manufacturing sector was estimated to be growing by 4.2% in 2008, down from 14.9% in 2007. Services sector growth was expected to slow to 4.9% in 2008 from 6.6% in 2007. An increase of 8.6% was projected for the domestic agriculture sector, in response to several government initiatives. The government also is seeking to diversify the economy to reduce dependence on the energy sector and to achieve self-sustaining growth. The Ministry of Finance is coordinating the launch of an international financial center. The Ministry of Trade and Industry is leading efforts to develop seven other sectors where the country is believed to have a comparative advantage: 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 new technology park, currently under construction.
Trinidad and Tobago has an open investment climate. Since 1992, almost all investment barriers have been eliminated. 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 $3.8 billion (book value) as of 2007. Total foreign direct investment inflows over the four years 2004-2007 amounted to approximately U.S. $3.8 billion. Among recent and ongoing investment projects are several involving U.S. firms. 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. World GTL is building the first commercial gas-to-liquids plant in the hemisphere. Several U.S.-branded hotel chains have entered the market; most recently, a Hyatt-managed hotel opened in early 2008, part of a multimillion-dollar waterfront 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 rising 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 and water shortages in the dry season. Flooding in the rainy season due to inadequate drainage affects urban and rural areas alike. Infrastructure improvement is one of the government's budget priorities, although late 2008 budget cuts driven by falling export revenue will delay the start of many new projects. Infrastructure plans include housing, roads and bridges, rural electrification, flood control, and improved water supply, drainage, and sewerage. The government has awarded a contract for the preliminary design of a light rail system which is projected to be completed in five to six years.
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. Two wireless providers, bmobile and Digicel, are currently operational, while a third is to be awarded in 2009. Two companies, Telestar Cable System Limited and Green Dot Limited, won an October 2007 Telecommunication Authority of Trinidad and Tobago (TATT) auction for radio spectrum to provide public Broadband Wireless Access (BWA) services. Improvements in service and price are likely as competition in the Internet services market increases in coming years.
Information by U.S. Department of State