T&T’s econ­o­my stood at a point of cau­tious op­ti­mism at the start of 2025.

The bank­ing sec­tor re­mained in strong po­si­tion, with the en­er­gy sec­tor still stir­ring from progress con­cern­ing the pos­si­bil­i­ty of Drag­on Gas field ex­plo­ration. There were al­so sig­nif­i­cant strides be­ing made in oth­er en­er­gy projects. How­ev­er, the wor­ry came from the fact that these projects were ex­pect­ed to con­tribute lat­er, rather than soon­er, as re­duced re­turns from the en­er­gy sec­tor cou­pled with in­creased ex­pen­di­ture in the year, had con­tin­ued to place pres­sure on T&T’s for­eign ex­change re­serves.

In­deed, this was one of the con­cerns raised by UK bank Bar­clays when it re­leased a re­port on the coun­try in March. Bar­clays stressed that the coun­try’s re­turns from the en­er­gy sec­tor had be­gun to dwin­dle, while ex­pens­es con­tin­ued to be high.

The re­port said, “When as­sess­ing T&T’s ex­ter­nal sec­tor, we note that de­spite strong cur­rent ac­count sur­plus­es (dri­ven pri­mar­i­ly by en­er­gy ex­ports), re­serves have still been trend­ing low­er in re­cent years. “

It added, “We fore­cast a low­er sur­plus in 2024 and 2025 as a re­sult of falling ex­ports. Through Q3 2024, to­tal ex­ports (in val­ue terms) were 9 per cent low­er than the pre­vi­ous year for the same pe­ri­od, dri­ven by a de­cline in both en­er­gy and non-en­er­gy ex­ports of 10 per cent y/y and 7 per cent y/y, re­spec­tive­ly.”

How­ev­er the re­port al­so not­ed that to­tal im­ports grew by 12 per cent year on year be­tween 2024 and 2025.

It al­so not­ed, “Re­serves are still at com­fort­able lev­els, but the mul­ti-year trend paints a wor­ri­some pic­ture. To main­tain a sta­ble ex­change rate, T&T has reg­u­lar­ly spent US$1 bil­lion a year (ex­clud­ing an ad­di­tion­al US$2.5bn in sov­er­eign wealth fund with­drawals) to pro­vide dol­lar liq­uid­i­ty. De­spite these ef­forts, it still suf­fers from for­eign cur­ren­cy short­ages.”

Econ­o­mist and for­mer In­de­pen­dent Sen­a­tor Am­ri­ta De­onar­ine said, “The eco­nom­ic per­for­mance of 2025 must be as­sessed through the lens of a decade of eco­nom­ic man­age­ment premised more on sur­vival than ex­pan­sion.

“As a re­sult, T&T con­tin­ues to grap­ple with the con­se­quences of slow growth, lim­it­ed fis­cal space and heavy re­liance on the en­er­gy sec­tor. Years of struc­tur­al strain, dri­ven by de­clin­ing en­er­gy pro­duc­tion and volatile prices, forced suc­ces­sive ad­min­is­tra­tions to pri­ori­tise fis­cal con­sol­i­da­tion over growth. With the econ­o­my con­tract­ing by near­ly 24 per cent over the past decade, re­cov­ery for an en­er­gy-de­pen­dent econ­o­my of this scale is nei­ther au­to­mat­ic nor swift with­out a clear, cred­i­ble and com­mit­ted growth frame­work.”

Fol­low­ing the April gen­er­al elec­tion, there were sev­er­al ma­jor changes in the lo­cal eco­nom­ic land­scape.

The much ma­ligned T&T Rev­enue Au­thor­i­ty was scrapped, while sev­er­al gov­ern­ment pro­grammes, in­clud­ing CEPEP, were scrapped, lead­ing to sig­nif­i­cant un­em­ploy­ment.

This proved a turn­ing point, ac­cord­ing to econ­o­mist Dr Jamelia Har­ris ex­plained, “The first quar­ter of 2025 record­ed a con­trac­tion in re­al eco­nom­ic ac­tiv­i­ty of -1.1 per cent (ac­cord­ing to the CBTT), sig­nalling a dif­fi­cult start to 2025.

“Tra­di­tion­al­ly, elec­tion-re­lat­ed spend­ing tends to bol­ster the econ­o­my which may have man­i­fest­ed in Q2; but on the oth­er hand, the end of Q2 (June) saw the start of lay­offs in the pub­lic sec­tor; be­gin­ning with CEPEP, and then in­clud­ing URP, Re­for­esta­tion work­ers and some types of con­tract works. This is im­por­tant as low­er-in­come work­ers (the bulk of those who were sent home) tend to spend a high­er share of their in­come do­mes­ti­cal­ly. Loss of these in­comes would have im­pact­ed on spend­ing and mea­sures of re­al out­put.”

How­ev­er, she said it was dif­fi­cult to state how much the lay­offs had af­fect­ed the econ­o­my just yet as all the da­ta for 2025 was not yet avail­able.

But the Cen­tral Bank Mon­e­tary re­port for No­vem­ber al­so summed up a drop off from a po­si­tion of ear­li­er en­thu­si­asm, es­pe­cial­ly as the year went on.

The Nu­trien shut­down was al­so seen as a po­ten­tial net neg­a­tive for the econ­o­my in 2025.

The Cen­tral Bank al­so stat­ed ac­tiv­i­ty in the non-en­er­gy sec­tor seemed to los­ing mo­men­tum, as the Cash­less Pay­ments In­dex showed signs of growth at a much slow­er pace.

The MPC al­so agreed that the ma­jor lay­offs al­so af­fect­ed the econ­o­my as it stat­ed, “Short to medi­um-term labour mar­ket con­di­tions face pres­sures due to re­cent pol­i­cy de­vel­op­ments. The clo­sure of ma­jor state em­ploy­ment pro­grammes, in­clud­ing CEPEP and URP, has elim­i­nat­ed a sig­nif­i­cant source of jobs for thou­sands of low-skilled work­ers who may find it dif­fi­cult to se­cure em­ploy­ment in oth­er sec­tors.”

The De­cem­ber Mon­e­tary Pol­i­cy An­nounce­ment stat­ed the US-Venezuela ten­sions late in the year al­so cre­at­ed a slow­down in the non-en­er­gy sec­tor due to un­cer­tain­ty.

Dr Har­ris said, “The is­sues of jobs have been cen­tral to 2025. There is usu­al­ly some churn in jobs as the Gov­ern­ment changes, but 2025 saw the clo­sure of some flag­ship pro­grammes, with lit­tle warn­ing. In ad­di­tion to this, we have main­tained rel­a­tive­ly low rates of un­em­ploy­ment, but this masks de­clin­ing labour force par­tic­i­pa­tion, which is cur­rent­ly around 55 per cent. This should be cause for con­cern. We al­so need to think about the qual­i­ty of jobs be­ing cre­at­ing. The fact that so many work­ers could be sent home (CEPEP, etc) shows how pre­car­i­ous our labour mar­ket is for many.”

She said there was mixed in­vestor con­fi­dence as a re­sult of the state of the econ­o­my but ex­plained the gov­ern­ment had been do­ing some work to ad­dress this is­sue.

Dr Har­ris said, “The Gov­ern­ment has in­tro­duced some mea­sures that have been wel­comed by the busi­ness com­mu­ni­ty, such as the Pri­vate Sec­tor Or­gan­i­sa­tion of T&T. On the oth­er hand, the re­gion­al ten­sions and new pol­i­cy stance re­gard­ing Cari­com is con­cern­ing, es­pe­cial­ly as a sig­nif­i­cant share of our man­u­fac­tur­ing out­put is ex­port­ed to Cari­com coun­tries. In­vestor con­fi­dence would have al­so been ad­verse­ly af­fect­ed by the neg­a­tive out­look giv­en by rat­ings agen­cies.”

De­onar­ine said, “Against this back­drop, macro­eco­nom­ic sta­bil­i­ty was large­ly pre­served in 2025. The new ad­min­is­tra­tion has so far fo­cussed on de­ter­min­ing the most suit­able pol­i­cy mix to re­cal­i­brate the econ­o­my. As a re­sult, 2025 has large­ly been a year of as­sess­ment, tak­ing stock of ex­ist­ing eco­nom­ic con­di­tions while de­sign­ing an ap­pro­pri­ate pol­i­cy frame­work. How­ev­er, pol­i­cy mo­men­tum has yet to keep pace with the con­tin­ued ero­sion of fis­cal and growth buffers.”

She added, “The Gov­ern­ment’s agen­da faces sig­nif­i­cant head­winds from on­go­ing fis­cal con­straints. The fis­cal deficit is pro­ject­ed at ap­prox­i­mate­ly 5 per cent of GDP in fis­cal year 2025, while the debt-to-GDP ra­tio has risen to about 84 per cent.

“Al­though T&T holds sub­stan­tial liq­uid as­sets, in­clud­ing the Her­itage and Sta­bil­i­sa­tion Fund, ef­fec­tive fis­cal space re­mains lim­it­ed. This con­strains the Gov­ern­ment’s abil­i­ty to fi­nance new growth ini­tia­tives or ful­ly im­ple­ment its pol­i­cy pri­or­i­ties.”

The Bar­clays re­port al­so not­ed that in the face of de­clin­ing en­er­gy rev­enues, non-en­er­gy rev­enue has been looked up to sup­port the econ­o­my how­ev­er re­cent trends emerged that tax rev­enues proved a ma­jor fac­tor com­ing in­to 2025.

The Bar­clays re­port said, “T&T’s non-en­er­gy rev­enue has av­er­aged ap­prox­i­mate­ly 17.6 per cent of GDP in the past ten years and in 2024 was 17.8 per cent of GDP (70 per cent of to­tal rev­enues).

“Fur­ther­more, last year, the main con­trib­u­tor was tax rev­enues, which rep­re­sent­ed 14.8 per cent of GDP (58 per cent of to­tal). The coun­try’s tax struc­ture is built main­ly on a 30 per cent cor­po­rate in­come tax (35 per cent for com­mer­cial banks and petro­chem­i­cal com­pa­nies), a 25 per cent per­son­al in­come tax (which in­creas­es to 30 per cent for in­di­vid­u­als earn­ing more than $1 mil­lion/year, or c US$150,000 a year), and a VAT of 12.5 per cent.”

Dr Har­ris said,”The bot­tom line is that the econ­o­my con­tin­ues to chug along with lit­tle change to some of the long term struc­tur­al prob­lems, which need to be ad­dressed; the in­abil­i­ty to suf­fi­cient­ly di­ver­si­fy the econ­o­my, tax base and source of forex earn­ings; de­clin­ing labour force par­tic­i­pa­tion, un­der­em­ploy­ment and in­suf­fi­cient con­cern for de­cent jobs; and per­haps most im­por­tant­ly, cred­i­ble long-term plan­ning and pol­i­cy con­sis­ten­cy which is crit­i­cal for con­fi­dence in the econ­o­my.”