Oil Price Rebound, Expenditure Cuts Will Reduce Trinidad & Tobago's Fiscal Deficit

• Fitch Solutions expects Trinidad & Tobago’s (T&T) fiscal deficit will narrow sharply in 2021, supported by higher energy prices. The agency forecasts that T&T will run a fiscal deficit of 5.7% of GDP in 2021 after the COVID-19 pandemic pushed the deficit to an estimated 11.6% of GDP in 2020. 
• A continued commitment to expenditure reduction will also help to narrow the fiscal deficit. The ruling People’s National Movement (PNM) government has sharply reduced expenditures in recent years to stem public debt growth. 
• Public debt levels will continue to rise in 2021 despite the sharp deficit reduction. T&T’s high debt levels and limited growth have underpinned fiscal consolidation over the past decade.
• That said, Fitch Solutions expects this trend will continue over the coming years, where it expects public debt will peak in 2021 at 68.1% of GDP before gradually declining to 64.9% of GDP by 2025.
• Despite the large financing requirement, T&T’s sovereign wealth fund will keep financing risks contained over the coming years. Additionally, a stronger medium-term energy price outlook and contained expenditure growth will limit T&T’s financing needs.

(Source: Fitch Solutions)