T&T’s Economy Beginning to Recover

• Trinidad and Tobago's (T&T’s) economy is beginning to recover, the International Monetary Fund (IMF) said, citing stability, low inflation and renewed investor interest at the close of its 2026 Article IV review. The assessment followed a two-week official visit by an IMF staff team led by Ana Guscina, which concluded with a meeting on February 9, 2026, with Minister of Finance Davendranath Tancoo.
• According to the IMF, T&T’s economy is gradually recovering to pre-pandemic levels amid persistent headwinds. The non-energy sector, particularly manufacturing and services, has underpinned recent growth, but stagnant production in the mature energy sector has weighed on activity. Economic growth is therefore expected to remain subdued in the near term before gradually recovering over the medium term.
• The economy is estimated to have grown by 0.8% in 2025, driven by non-energy sectors. Furthermore, real GDP growth is projected to moderate to 0.7% in 2026, as stronger growth in the non-energy sector partly offsets an anticipated decline in energy production. That said, medium-term growth prospects are expected to improve as several new energy projects, most notably Manatee, come onstream, lifting growth to around 2.9% in 2027 and 3.5% in 2028. Inflation is also projected to remain low and hover around 2% in the near to medium term, broadly in line with international trends.
• The current account (CA) balance remains in surplus, though the external position has weakened, and foreign exchange (FX) shortages persist. Foreign reserves remain adequate, with coverage at 6.4 months of prospective imports. Furthermore, the Heritage and Stabilisation Fund (HSF) assets continue to provide an additional sizeable buffer (US$6.38Bn as of February 2026). Looking ahead, the CA surplus is expected to improve to 3.0% of GDP in 2025, reflecting a modest increase in energy exports and a decline in goods imports. Over the medium term, the CA surplus is projected to average about 4% of GDP. However, the CA is assessed as moderately weaker than fundamentals.
• In terms of fiscal performance, the FY2026 (fiscal year ending September 30, 2026) budget introduces important measures to strengthen fiscal revenues, fiscal management, social protection, and economic diversification. However, the IMF noted that stronger fiscal consolidation is needed to place public debt on a firmly declining trajectory, rebuild policy buffers, and safeguard market access. The agency projects an overall deficit of 5.0% of GDP for FY2026, a slight improvement compared to FY2025 (5.5%). Achieving the authorities’ 2.2% of GDP fiscal balance target will require additional fiscal measures amounting to 2.8% of GDP. 
• Assuming an unchanged exchange rate regime, the IMF suggests targeting a 3.5% of GDP fiscal deficit in FY2026, by implementing 1.5% of GDP in additional high-quality measures. Some of the suggested measures include broadening the tax base by phasing out extensive zero ratings and exemptions in the value-added tax (VAT), accelerating the removal of untargeted utility subsidies while protecting the vulnerable households, streamlining transfers to state owned enterprises (SOEs), and improving the efficiency and quality of public expenditure. Such still sizeable and frontloaded adjustment will put debt on a firmly downward path and reduce vulnerabilities, while the emphasis on base broadening, efficiency, and targeting would help mitigate the impact on near-term growth.

(Source: IMF)