Monday 14 October, 2019

Standard & Poor's affirms T&T’s rating, revises outlook to negative

International credit rating agency Standards and Poors has revised its outlook on Trinidad and Tobago to “Negative” from “Stable”. 

The rating agency affirmed its 'BBB+/A-2' long- and short-term foreign and local currency sovereign credit ratings on Trinidad and Tobago.

S&P stated that the “negative” outlook reflects the view that there is at least a one-in-three chance that S&P could lower the ratings over the next 12-to-24 months.

It is expected that moderately higher energy prices and higher production levels would lead to a mild economic recovery and smaller current account deficit over this period.

S&P believes there is uncertainty about whether this improvement will be sufficient to mitigate the impact that imbalances such as:

1 Exchange rate pressure

2 Restrictions on accessing foreign currency

3 Negative yield differentials on short-term-treasury securities relative to those of the U.S.

4 Historical gas supply shortages

These could lead to a faster depletion of the country's external assets or a weakening of the effectiveness of monetary policy. Under this scenario, S&P could lower the rating.

The credit rating agency raised another point of concern that could factor in a downgrade in the next two years, that is, the government's fiscal consolidation measures in shrinking the deficit.

S&P said it could take a negative rating action should the government fail to implement key institutional reforms such that large revenue collection leakages and weaknesses in data provision persist into the foreseeable future.

On the flip side, the rating agency cited that the outlook moving to stable would be based on a strong track record of growth in the energy sector, for instance, due to higher-than-expected energy prices or production, shrinking current account deficits and larger capital inflows.

"Additionally, combined with a track record of successful fiscal consolidation, declining interest costs and effective institutional reform, could lead S&P to revise the outlook to stable."


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