Trinidad and Tobago (T&T) faces persistent economic challenges, with economists and rating organizations such as the World Bank and the Inter Monitory Fund highlighting the government’s inability to enact meaningful reforms to stimulate sustainable growth. Central to this issue is the country’s heavy reliance on the energy sector, which accounts for over 80% of export earnings. Declining energy production, underinvestment in infrastructure, and a lack of diversification strategies have left the economy vulnerable to global market fluctuations.
Challenges in the Energy Sector
The energy sector’s decline has been evident, with a 10.3% year-on-year reduction in output for late 2023. While some new projects, like the Dragon Gas Field agreement, offer potential, they face risks such as geopolitical instability with the current economic and political crisis in Venezuela and shifting global energy trends. The government’s inability to attract significant upstream investments has left T&T lagging behind regional peers who have adapted to market shifts.
Stalled Diversification Efforts
Despite ongoing rhetoric about diversifying into non-energy sectors such as manufacturing, agriculture, and digital services, growth remains lethargic. The non-energy sector grew only 1.3% in 2023, and key industries struggle with limited government support, bureaucratic barriers, and inadequate incentives for innovation.
Fiscal Mismanagement and Rising Debt
The fiscal deficit remains a unyielding issue, projected to widen to 2.7% of GDP in 2024 due to lower energy revenues, increased public sector wages, and higher infrastructure spending. Public debt has risen to over 70% of GDP, reflecting fiscal mismanagement and a lack of essential reforms. The long-delayed implementation of property tax and other revenue-generating measures further exacerbates the situation.
Missed Opportunities in Emerging Sectors
T&T has failed to capitalize on opportunities in renewable energy, technology, and advanced manufacturing. Moreover, digital transformation, a critical component of modern economies has seen little progress. Expanding broadband access, supporting tech start-ups, and modernizing public services remain underdeveloped areas, leaving the country ill-prepared for a technology-driven global economy.
Labor Market and Social Issues
Unemployment, particularly among youth, continues to rise. The lack of targeted employment programs and scarce investment in education and vocational training contribute to a growing brain drain. Small and medium-sized enterprises (SMEs), which could drive job creation, face significant barriers such as limited financing and bureaucratic challenges.
The Way Forward
To reverse the economic stagnation, experts underscore the need for bold reforms. Such include:
• Diversification: Prioritizing non-energy exports, investing in renewable energy, and supporting high-potential sectors.
• Fiscal Responsibility: Implementing tax reforms, reducing subsidies, and improving public spending efficiency.
• Support for SMEs and Innovation: Creating a business-friendly environment to encourage entrepreneurship.
• Digital Transformation: Expanding digital infrastructure and fostering a tech-based economy.
Without decisive action, T&T risks further economic decline, eroding its resilience and competitiveness on the global stage. If you want an example on what economic decline could mean for us as a nation just ask Venezuela.