Energy Prices To Sustain Current Account Surplus In Trinidad & Tobago In 2023

  • Fitch expects that lower gas prices will cause Trinidad & Tobago’s (T&T) current account surplus to narrow from 13.3% of GDP in 2022 to 10.9% of GDP in 2023. This change will be mostly due to the narrowing trade surplus, which is expected to shrink from 18.8% of GDP to 17.0% of GDP.
  • The trade surplus will continue to narrow over the longer term, though the overall current account balance will remain in surplus throughout the forecast period. The 2022 surplus was boosted by elevated energy exports, which were even higher than expected. Notably, Fitch revised its 2022 current account forecast from a surplus of 6.3% of GDP to 13.3% of GDP after goods exports rose 159.0% y-o-y in Q1 2022.
  • On the other hand, exports are forecast to fall. Fitch expects that goods imports will be essentially flat in 2023, (+1.0%). The rising cost of imported food and refined fuels caused T&T’s import bill to rise by 29.8% in 2022. In 2023, however, softer commodity prices will reduce this pressure. Commodity prices will slip but remain strong, and it is also expected that private consumption will stay strong and keep imports sticky.
  • The services trade deficit will widen from 4.3% of GDP in 2022 to 6.0% in 2023, as slowing global growth cuts demand for international travel. The lifting of pandemic-related lockdowns and travel restrictions caused the transport and tourism sectors to recover, narrowing the service trade deficit in 2022.
  • T&T’s wide current account surplus allowed the country to accumulate foreign exchange reserves in 2022, and this is expected to continue in 2023. T&T’s reserves are anticipated to remain well above 8.0 months of import cover through 2023, due to consecutive future current account surpluses, underpinning continued external account stability.
  • Risks to the forecast remain slightly to the downside. Energy prices are expected to stay well above pre-COVID levels. However, if energy prices fall below Fitch’s current expectations next year, the current account surplus will be much narrower than currently anticipated.

(Source: Fitch Solutions)