S&P: Republic of Trinidad and Tobago 'A/A-1' Ratings Affirmed; Outlook Remains Stable

NEW YORK (Standard & Poor's) Dec. 21, 2012--Standard & Poor's Ratings Services today said it affirmed its 'A/A-1' long- and short-term sovereign credit ratings on the Republic of Trinidad and Tobago. The outlook remains stable. In addition, our 'AA' transfer and convertibility (T&C) assessment remains unchanged. "The ratings on Trinidad and Tobago are supported by the country's net external asset position, low external vulnerability, and stable political system," said Standard & Poor's credit analyst Joydeep Mukherji. "The country's large energy sector sustains long-term growth prospects and provides revenues that should allow the government to maintain moderate levels of debt." The government's Heritage and Stabilization Fund, which holds fiscal assets of about 19% of GDP, and its investor-friendly policy in the energy sector augur well for long-term fiscal flexibility. "Trinidad and Tobago's high dependence on the energy sector, which accounted for 45% of GDP and 82% of merchandise exports in 2011, constrains the ratings," said Mr. Mukherji. In addition, other sectors of the economy--whose expansion could gradually diversify its profile and reduce its vulnerability to a sharp drop in the price of oil and natural gas--are developing slowly. The stable outlook reflects our expectation that the economy will resume growing in 2013. The country's growth prospects, as well as the trajectory of the government's debt burden, depend on the long-term development of the energy sector. Success in boosting exploration and production levels, as well as in enlarging downstream activities, could bolster GDP growth, gradually improve government finances, and reduce the sovereign's debt burden. That, along with steps to strengthen financial laws and supervision to avoid episodes like the 2009 collapse of CLF Financial, could, over time, lead to an upgrade. Conversely, a protracted slowdown in the energy sector, along with poor implementation of the government's own investment plans, could result in prolonged low economic growth and persistent fiscal deficits, weakening the country's fiscal and external profiles. Under such a scenario, we could lower our ratings on Trinidad and Tobago.

• Full name
  Republic of Trinidad and Tobago
• Registration country
  Trinidad and Tobago