Trinidad And Tobago Will Run Small Deficit In 2023 As Hydrocarbon Exports Remain Strong

• Fitch Solutions expects that Trinidad and Tobago's (T&T) budget deficit will shrink slightly from 1.1% of GDP in FY22 to 0.9% in FY23. This is a major reversal of trends observed in pre-COVID years when T&T ran an average deficit of 4.3% (FY15-FY19).
• Persistent strength in hydrocarbon exports will help to drive the reduction in the budget deficit, via stronger revenue growth. T&T benefitted immensely throughout 2022 from hydrocarbon revenue owing to higher energy prices. Although T&T does not provide an exact breakdown, in USD terms, about a quarter of hydrocarbon production revenue currently comes from oil with the rest coming from natural gas.
• According to Fitch’s Oil & Gas team, growth in hydrocarbon production in the barrel of oil equivalent (boe) terms will ease from 8.8% y-o-y in 2022 to 4.2% y-o-y in 2023, but still well above pre-Covid production levels. Meanwhile, hydrocarbon exports are expected to remain strong in 2023, and Fitch forecasts that T&T export volumes will come in at about 314,000 in boe terms, compared to 286,000 in 2022, a 10.0% increase.
• That being said, expenditure growth will remain moderate in T&T as policymakers continue to signal their commitment to fiscal consolidation. Fitch forecasts that government spending as a share of GDP will drop back from an estimated 27.2% of GDP in FY22 to 26.9% in FY23, as T&T’s government continues to avoid pursuing significant spending increases despite the revenue windfall.
• The combination of still robust nominal output growth and a smaller expected deficit should see the government debt-to-GDP ratio decline from 72.3% in 2022 to 71.3% this year and is likely to remain manageable in the years ahead as the government continues with its cautious approach to fiscal policy.

(Source: Fitch Solutions)