Trinidad and Tobago’s economy continued its gradual recovery in 2025, although the outlook remains shaped by fiscal pressures, energy-sector uncertainty, and the wider impact of global shocks. According to the International Monetary Fund’s latest Article IV Consultation, real GDP growth moderated to 0.8 per cent in 2025, while inflation returned to low pre-pandemic levels. The financial system remained stable, supported by steady credit growth and a well-capitalised banking sector.

Despite these positive signs, the IMF noted that persistent fiscal deficits have contributed to rising public debt. The country’s current account remained in surplus, supported by the energy sector, while international reserves continued to trend downward. However, reserves are supplemented by sizeable liquid assets held in the Heritage and Stabilisation Fund, which provides an important buffer against external shocks.

Looking ahead, growth is projected to remain modest in 2026 before strengthening over the medium term. New energy projects and continued momentum in the non-energy sector are expected to support future expansion. Inflation is forecast to rise temporarily in 2026 due to global commodity price developments before stabilising over the medium term. Higher energy prices are also expected to support fiscal and external balances in the near term, although the outlook remains highly uncertain.

The IMF highlighted the war in the Middle East as a key source of risk for Trinidad and Tobago, given the country’s exposure to global energy markets. While higher energy prices may improve fiscal and external revenues in the short run, delays in new energy projects or disruptions to mature fields could weigh on growth. This reinforces the need for continued reforms to strengthen resilience and reduce reliance on volatile energy income.

Against this backdrop, the IMF encouraged the authorities to pursue sustained fiscal consolidation while protecting vulnerable groups. Recommended measures include improving revenue collection, rationalising spending, reducing non-priority transfers, and strengthening the targeting of social programmes. The Fund also advised that any higher-than-budgeted energy revenues should be used mainly to rebuild fiscal buffers, including renewed deposits into the Heritage and Stabilisation Fund.

The IMF also welcomed ongoing efforts to strengthen fiscal institutions, including reforms to the National Insurance System, while calling for further measures to improve the long-term sustainability of the public pension system. It recommended adopting a medium-term fiscal framework supported by a well-designed fiscal rule and credible debt anchor to better manage volatile energy revenues and improve intergenerational equity.

On monetary and financial sector policy, the IMF supported a gradual move toward a more neutral policy stance to help stabilise capital flows and address the negative interest rate differential with the United States. It also encouraged reforms to improve the functioning of the foreign exchange market and, over time, allow for greater exchange rate flexibility. Continued vigilance over sovereign-financial linkages, cyber-security risks, and climate-related risks was also recommended.

The IMF’s assessment points to an economy that remains stable but exposed to important vulnerabilities. Trinidad and Tobago’s medium-term prospects will depend on disciplined fiscal management, timely execution of energy projects, deeper economic diversification, and reforms that improve competitiveness, investment, and resilience.

Source: (IMF)

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