T&T Outlook Improves Marginally, Structural Weakness Persists

• A comparison of the IMF's Staff Concluding Statement (February 10, 2026) and the Executive Board Concluding Statement (May 18, 2026) reveals a modest improvement in Trinidad and Tobago's (T&T’s) near-term macroeconomic outlook, according to economist Prof. Roger Hosein.
• Beneath the incremental revisions lies a familiar structural story: a slowly recovering non-energy sector carrying the burden of growth, a contracting energy sector weighing on long-term potential, and persistent vulnerabilities in inflation, fiscal balance, and external buffers.
• "Broadly, both IMF assessments present the same underlying structural narrative: T&T continues to experience weak aggregate growth due primarily to contraction in the energy sector, while the non-energy sector increasingly serves as the principal driver of economic expansion," Hosein stated. He added that the May 18 Executive Board Concluding Statement reflects a slightly more inflationary and marginally stronger macroeconomic outlook than the earlier Staff Concluding Statement of February 10.
• The most notable adjustment is the upward revision in projected nominal GDP growth for 2026 by approximately 2.5 percentage points, alongside modestly improved energy revenue expectations despite the anticipated contraction. "This suggests the IMF became somewhat more optimistic on near-term energy sector performance, likely reflecting stronger prices. The upward revision in projected gross official reserves further reinforces the view that the external position was expected to improve modestly relative to the earlier assessment," Hosein said.
• Despite these adjustments, the structural composition of growth remains largely unchanged and, in some respects, increasingly concerning. The energy sector is still projected to contract sharply by -4.5% in 2026, while the non-energy sector expands by 2.6%. "This divergence reinforces a critical structural reality. This shows that the energy sector still dominates export earnings, fiscal revenues, and foreign exchange generation, leaving the economy exposed to external shocks, energy price volatility, and balance of payments pressures," Hosein said.
• Other than the upward revisions to inflation expectations, the GDP deflator projection increased from 1.4% to 2.8%, end-of-period inflation rose from 2.4% to 3.1%, and average inflation increased from 1.4% to 1.8%. The professor noted that "These revisions suggest that the IMF became more concerned about emerging inflationary pressures and expected stronger domestic price growth over the medium term, potentially reflecting higher global commodity prices, imported inflation, and exchange rate-related pressures."
• The fiscal outlook also improved marginally with budgetary revenue projections revised marginally upward while expenditure projections were revised slightly downward. However, the revisions also continue to reveal underlying structural weakness beneath the improved headline outlook. It was noted that non-energy revenue projections were revised slightly downward, public debt and central government debt projections improved only marginally, and key expenditure categories, including capital and current spending, remained largely unchanged. This implies that the improved macroeconomic outlook remained heavily dependent on the energy sector rather than reflecting a broad-based strengthening of the non-energy economy.

(Source: Trinidad Express)