The Credit Rating Agency Moody’s has changed the outlook on T&T’s ratings from positive to stable and affirmed its Ba2 ratings.
In Moody’s report, it was indicated that the change in outlook to stable is driven by increasing external vulnerability risks, as highlighted by the accelerated pace of liquid foreign exchange reserves drawdown observed over the first four months of 2024.
Commenting on this move, economist Dr Marlene Attzs said the report suggests that the country’s credit profile was expected to remain stable, but there may not be an improvement in its creditworthiness.
She outlines the change in rating and also suggests greater cognisance should be taken about several risks that could impact economic activity in the country and its overall economic trajectory.
Dr Attzs noted that among the risks Moody’s highlighted is the decline in foreign exchange reserves, caused by lower gas prices and capital outflows, which could pose challenges for the economy.
“Consistent with the International Monetary Fund’s (IMF) Article IV Report, the government’s efforts to diversify the economy and increase revenue from sources other than energy are helping to balance these risks.
“Moody’s also recognises there is some growth in non-energy sectors. While Moody’s acknowledges the financial buffers we have, such as the Heritage and Stabilisation Fund (HSF), T&T needs to address the challenges in the energy sector and maintain a strong fiscal position to ensure continued stability.” Attzs explained.
She said a takeaway from this change in the outlook from Moody’s should prompt the Government to maintain a cautious approach while recognising the need for potential policy adjustments to address the factors that led to the revised outlook.
Giving his insight on the report, economist Dr Dave Seerattan said he was not surprised by this development given what has happened to gas prices recently. This, he said, is the main driver of the move from a positive to a stable outlook for the rating.
“The last rating in July 2023, which moved the outlook from stable to positive, was also significantly impacted by developments in the energy sector as well as fiscal consolidation efforts. The fact that developments in the energy sector have a significant impact on the rating is par for the course in an energy-based economy,” Seerattan added.
The important thing for T&T, he said, is that Moody’s affirmed the Ba2 rating in a context where risks are balanced.
“They also expect this rating to be resilient to potential project delays in the energy sector and increased capital flow volatility over the next two years until 2026, when more favourable ratings are likely based on new natural gas developments coming on stream,” he added.