Trinidad and Tobago WT/TPR/S/151 
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I. ECONOMIC ENVIRONMENT 
(1) OVERVIEW  
1. Trinidad and Tobago's economy has undergone a period of strong growth since its last 
Review in 1998.  Over the 1999-04 period, GDP expanded at an annual average rate of 7.7%, largely 
on account of the development in the hydrocar bons sector.  Per capita income has increased 
substantially during the period under review, to ove r US$8,800 in 2004.  As a result of the fast 
growth, the unemployment rate fell to 8.3% in 2004, its lowest in the past 20 years.  Labour productivity has risen at a rapid pace, above real wa ge growth, partly reflecting the strong growth in 
capital-intensive industries. 
2. Trinidad and Tobago's overall fiscal situation h as improved, and current expenditure has been 
kept under control; the Central Government ha s been posting current account surpluses since 
FY 1999/00.  One of the most important fiscal developments in recent years was the creation in 2000 of a stabilization fund, in which the Government  must deposit any additional revenues from a base 
petroleum price of US$25 a barrel, to act as a cu shion against any unexpected drop in petroleum 
prices, and strengthen the public sector savings effort. 
3. Growth in domestic prices has been containe d although inflationary pressures have built up 
since early 2004.  The Trinidad and Tobago dollar is pegged de facto to the U.S. dollar, and an appreciation of the real effective exchange rate has tended to erode external competitiveness during 
the period under review.  Fed by developments in  the energy sector, total merchandise trade expanded 
rapidly, with merchandise exports growing at an  annual average rate of 18.3% over 1999-03, while 
imports grew at an average of 5.5% (COMTRADE data ).  Foreign direct investment inflows were also 
substantial, taking the FDI stock to a level almost matching GDP. 
(2) M
ACROECONOMIC DEVELOPMENTS  
(i) Economic structure 
4. During the period under review, the economy of  Trinidad and Tobago has increased its 
reliance in the hydrocarbons sector (petroleum, natura l gas, and petrochemicals).  This sector directly 
generates over one third of GDP (T able I.1) and two thirds of me rchandise exports.  The "goods" part 
of the sector accounted for over 30% of GDP in 2004, while the "services" part accounted for less than 4%.  However, the importance of the sector go es well beyond its direct contribution to GDP.  For 
instance, activities such as the production of steel  and the generation of electricity are largely 
dependent on the hydrocarbons sector.  The manufacturing sector accounted for some 7.1% of GDP in 
2004, while the contribution of agriculture was barely 1.3%. 
5. The contribution of services to GDP decreased slightly during the period under review, to 
60.7% in 2000, partly reflecting the increase in th e share of the hydrocarbons sector.  The largest 
contribution to GDP stems from distribution, followed by financial services.  The tourism industry is 
concentrated mainly in Tobago and is not as importa nt as in other CARICOM countries;  however, its 
indirect contribution to economic activity appears significant (Chapter IV(6)(vi)).  Due to  Trinidad 
and Tobago's proximity to South America, and to the importance of its hydrocarbons industry, port 
activity has been increasing, especi ally for trans-shipment operations.  Reflecting the strong state 
participation in the economy, government services have a relatively high share of GDP. WT/TPR/S/151 Trade Policy Review 
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Table I.1 
Sectoral composition of GDP, at current market prices, 1999–04 
(Per cent)  
Sectors 1999 2000 2001 2002 2003 2004a 
GDP (TT$ million) 42,889.1 51,370.6 55,007.2 55,365.6 66,168.3 71,878.0 
Hydrocarbons 22.5 31.3 28.3 27.8 34.8 34.1 
  Exploration and production 12.2 17.4 15.8 16.3 20.8 20.4 
  Refining (including LNG) 3.1 5.5 4.4 4.1 5.8 6.0 
  Petrochemicals 2.9 4.2 3.9 3.3 3.9 4.0 
  Service contractors 1.6 1.4 1.4 1.5 1.4 1.3 
  Distribution 2.5 2.7 2.8 2.5 2.8 2.3 
  Asphalt production 0.1 0.0 0.0 0.0 0.0 0.0 
Non-hydrocarbons industry 76.9 69.1 71.6 71.9 66.1 65.7 
 Agriculture  1.9 1.4 1.3 1.3 1.2 1.3 
  Export agriculture 0.1 0.0 0.0 0.0 0.0 0.0 
  Domestic agriculture 0.9 0.7 0.8 0.7 0.7 0.7 
  Sugar 0.9 0.6 0.5 0.5 0.4 0.5 
 Manufacturing  8.0 7.1 7.4 7.8 7.1 7.1 
  Food, beverages and tobacco 3.7 3.3 3.5 3.5 3.1 3.3 
  Textiles, garments and footwear 0.2 0.2 0.2 0.2 0.1 0.1 
  Printing and publishing 0.8 0.8 0.8 0.7 0.6 0.5 
  Wood and related products 0.4 0.2 0.2 0.2 0.2 0.2 
  Chemical and non-metallic products 1.2 1.3 1.3 1.3 1.1 1.0 
  Assembly-type industries 1.1 0.8 1.1 1.5 1.5 1.6 
  Miscellaneous manufacturing 0.6 0.4 0.4 0.4 0.3 0.3 
 Services 67.0 60.7 62.9 62.8 57.9 57.3 
  Electricity and water 2.1 1.7 1.6 1.4 0.9 0.9 
  Construction and quarrying 8.1 7.5 7.9 6.7 6.1 6.2 
  Distribution and restaurants  17.8 16.4 15.9 16.8 15.0 14.7 
  Hotels and guest houses  0.5 0.4 0.4 0.4 0.3 0.3 
  Transport, storage and communication  9.1 8.6 10.1 10.7 10.1 9.9 
  Finance, insurance and real estate 14.8 14.2 13.6 14.2 12.8 12.5 
  Government 9.5 7.6 8.6 7.8 7.9 8.2 
  Education and cultural services 3.2 2.7 3.2 3.2 3.3 3.3 
  Personal services 5.6b 1.6 1.6 1.6 1.4 1.3 
Correction for imputed service charge -3.9 -4.3 -3.8 -4.0 -3.8 -3.6 
Plus VAT 4.5 3.9 4.0 4.3 3.0 3.8 
 
a Estimates. b Includes hotels and guest houses, education a nd community services, and personal services. 
 
Source:  Central Statistical Office. 
6. The Government has launched a long-term plan to achieve developed-country status by that 
year:  the Vision 2020 initiative encompasses a wi de-ranging structural reform agenda, aimed at 
addressing competitiveness issues, fostering economi c diversification, promoting employment, and 
reducing poverty.  In this respect, the main pillars of the programme are:  (a) maximizing returns from 
the hydrocarbons sector, through increased particip ation in the value chain and by raising the 
Government's tax intake in a manner consiste nt with the encouragement of investment;  
(b) diversifying the economy, focused on six main sectors:  traditional manufacturing, a new 
technology-based industrial sector, tourism, financ ial services, agriculture, and the small business 
sector;  and (c) ensuring that the benefits of ec onomic growth and development are shared by all 
sections of the population.1 
                                                      
1 Ministry of Finance (2004a) and (2004d). Trinidad and Tobago WT/TPR/S/151 
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7. An important structural reform step during the period under review was the restructuring of 
the sugar industry, leading to the partial priva tization of the state-owned sugar company CARONI 
1975 Limited (Chapter IV(2)(i)).  No other major privatization operation has taken place during the 
period under review, as new foreign investment and partnerships have been preferred.  Although the 
number and scope of state-owned enterprises remains large, their regulation an d supervision has been 
reinforced, and their financial situation has improve d (Chapter III(4)(iv)(b)).  Reforms have also been 
introduced in the financial sector (Chapter IV(6)(ii)) and telecommunications services 
(Chapter IV(6)(iii)).  In maritime transport and port services, the authorities are aiming to enhance the 
efficiency of port operations (Chapter IV(6)(iv)).  
(ii) Production and employment 
8. In July 2004, the Central Statistical Office  released a revised annual national accounts series2;  
the new series uses the year 2000 as the base year, while the old series used 1985.   The rebasing was 
designed to capture the major structural changes that have taken place in the Trinidad and Tobago 
economy in recent years, in particular to take into  account the larger contribution to GDP of natural 
gas and petrochemicals. 
9. The Trinidad and Tobago economy has experience d strong growth since its last Review in 
1998.  Over 1999-04, GDP expanded by over 56% in r eal terms, equivalent to an annual average 
growth rate of 7.7%.  The strong performance of the energy sector has been th e main force behind this 
growth, which attained a peak of 13.2% in 20 03 (Table I.2):  the hydrocarbons industry's GDP 
expanded in real terms at an annual average rate  of 15.8%.  Growth in the non-hydrocarbons sector, 
particularly tradeables, has proceeded at a much slow er pace, with an average annual real growth rate 
of 3.6% over 1999-04;  growth in this sector, may have been affected among other things by the loss 
of competitiveness due to a real effective exchange rate appreciation (see below).   Reflecting strong 
real growth and a stable nominal exchange rate, pe r capita income has increased substantially during 
the period under review, to over US$8,800 in 2004.  
Table I.2 
Basic economic indicators, 1999-04 
 1999 2000 2001 2002 2003 2004 
I.  GDP       
Current GDP (TT$ million) 42,889.1 51,370.6 55,007. 2 55,365.6 66, 168.3 71,878.0 
Current GDP (US$ million) 6,837.4 8,186.5 8,872. 6 8,914.3 10, 564.4 11,461.1 
Per capita GDP (US$) 5,403 6,472 6,952 6,921 8,258 8,887 
Real GDP, growth rate (%) 8.8 7.3 4.3 6.8 13.2 6.2 
Hydrocarbons industry 21.5 12.5 5.6 13.5 31.2 10.5 
Non-hydrocarbons sector 3.2 5.5 2.8 3.4 3.8 2.9 
Agriculture 9.6 -2.4 8.7 6.0 -18.0 -20.2 
Manufacturing 3.3 6.0 9.8 4.6 5.0 6.6 
Services 5.6 5.6 1.9 3.1 4.2 2.9 
Breakdown of GDP by type of expenditure (% of current GDP)  
Total consumption 73.2 69.1 69.8 74.8 66.7 65.2 
Private 58.5 57.1 56.1 60.3 52.3 51.7 
Government 14.7 15.6 13.7 14.5 14..5 13.5 
Gross fixed capital formation 21.0 17.0 19.4 19.6 18.0 18.0 
Exports of goods and services 50.0 59.2 55.3 47.6 55.8 62.4 
Table I.2 (cont'd) 
                                                      
2 Central Bank of Trinidad and Tobago (2004). WT/TPR/S/151 Trade Policy Review 
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 1999 2000 2001 2002 2003 2004 
Imports of goods and services 44.2 45.3 44.6 42.3 40.5 45.0 
Gross national savings 21.5 23.7 24.5 20.4 27.3 31.0 
External savings 0.4 6.6 5.0 0.9 9.3 13.0 
II.  Memo items       
Population (million) 1.26 1.26 1.27 1. 28 1.28 1.29 
Labour force (million) 0. 56 0.57 0.58 0. 59 0.60 0.60 
Unemployment rate 13.1 12.1 10.8 10.4 10.5 8.3 
Index of average weekly earnings (% change) .. 9.1 9.3 11.6 13.2 3.9a 
Index of labour productivity (% change) .. 5.3 8.2 11.9 12.1 -1.0a 
Oil export price (US$/barrel) .. 28.2 24.3 25.0 28.9 37.3 
 
.. Not available. 
 a First quarter. 
 
Source:  CBTT online information.  Available at:  http://www.ce ntral-bank.org.tt/;  Central Statistical O ffice online 
 information.  Available at:  http://www.cs o.gov.tt/statistics;  and IMF (2005a) and (2005b). 
10. On the expenditure side, domestic consump tion represents some 65% of GDP, with 
government consumption accounting for 14.5% a nd private consumption for 51.7% of GDP, 
respectively.  Imports account for around 50% of expenditure.  Consumer spending accounts for 
between 50% and 60% of GDP, a relatively small sh are compared with most other economies, and a 
consequence of the large share of GDP represented by net exports.  Exports and imports of goods and 
services combined represent some 95% of GDP;  net exports systematically make an important 
contribution to GDP. 
11. Investment growth has been triggered in recent years mainly by foreign investment and joint 
ventures in the natural gas industry, and by inv estment in some manufacturing activities such as 
petrochemicals and iron and steel.  The Government is also pursui ng an ambitious public investment 
programme (see below).  Despite an average annua l growth rate of over 7% between 1999 and 2003, 
investment's share of GDP has de clined somewhat, to 18% of GDP in 2004, probably reflecting the 
higher increase in net exports and in GDP in general.   On the other hand, the savings/GDP ratio has 
increased substantially in recent year s, mainly due to higher external savings reflecting the increase in 
hydrocarbon production and prices.  Savings have consistently exceeded investment in recent years, 
resulting in a surplus in the current account of the balance of payments. 
12. Robust growth in the economy has had a positiv e impact on the labour market, reducing the 
unemployment rate to 8.3% in 2004, which repr esents a significant improvement from the 10.5% 
posted for 2003.  However, unemployment remains high considering the fast pace of economic 
growth, possibly because growth has been focu sed on the more capital-intensive areas of the 
economy, namely the hydrocarbons sector.  Despite  high unemployment, nominal wages have risen 
considerably during the period under review;  the index of average weekly earnings, which includes 
all sectors except petroleum and sugar, posted an  average annual increase of 10.6% for the period 
2000-03, well above the inflation rate for the same  period.  Real wage growth has lagged behind 
labour productivity growth, which for 2000-03 reached an  average annual rate of 10.3%.  This is also 
partly the result of stronger growth in capital-intensive industries. 
(iii) Monetary and exchange rate policy 
13. The Central Bank of Trinidad and Tobago ( CBTT) is in charge of monetary policy 
formulation and implementation.  The CBTT's func tioning is regulated by the Central Bank Act, 
Chapter 79:02, as amended by Act No. 2 of 1986, Act No. 10 of 1993, and Act No. 23 of 1994.  In 
accordance with the Act, the CBTT mu st keep the Minister of Finance informed of the monetary and Trinidad and Tobago WT/TPR/S/151 
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banking policy pursued or intended by the Bank.  Th e Minister of Finance may, after consultation 
with the Governor, issue written directives of a gene ral nature to the Bank as may be necessary to give 
effect to the monetary and fiscal policies of the G overnment.  As prescribed in the Central Bank Act, 
the CBTT also acts as banker for the Government .  The Central Bank (Amendment) Act, 1994 gave 
the CBTT the additional responsibility of reviewi ng legislation affecting the financial system 
(Chapter IV(6)(ii)).  The Insurance (Amendment ) Act 2004 gave the Central Bank responsibility for 
supervising the insurance industry. 
14. The CBTT considers that monetary stability, unde rstood as a low rate of increase in domestic 
prices and the stable behaviour of the forei gn exchange market, will provide the monetary 
environment most conducive to growth.  In this que st for monetary stability, the main objective of 
monetary policy is to achieve a low and stable ra te of inflation.  The Central Bank has set an 
unofficial headline inflation target of 4-5% for 2005.  Having reference to this, the CBTT views a 
stable foreign exchange market as critical to keeping inflation low .3  This has resulted in a virtual peg 
of the Trinidad and Tobago dollar with respect to the U.S. dollar. 
15. Until 2002, the main policy instrument for monetary control was the use of unremunerated 
legal reserve requirements, coupled with  a resort to open-market operations.  In April 2002, the CBTT 
announced that it was implementing a new operational framework for the conduct of monetary policy, 
which would involve targeting and announcing the overnight repurchase (repo) rate, and making 
liquidity available to banks through repo agre ements by purchasing securities from the banking 
system with a subsequent matched re-sale.  Th e repo rate, which is announced by the CBTT on a 
monthly basis, is the measurement of monetary  policy stance and has become the benchmark for 
commercial banks' lending rates.4  By making monthly announcements, the CBTT seeks to increase 
the transparency of monetary policy and to contri bute to monetary stability by providing banks with 
explicit guidance on the pric ing of short-term money.5  As part of the initiative to improve 
transparency, the CBTT began publishing a Monetary Policy Report in August 2001. 
16. During most of the period under Review, a nd until early 2005, the CBTT had pursued an 
accommodative monetary policy stance, initially by lowering the reserve requirement and then by 
maintaining the repo rate at a low level.  The reserve requirement was lowered from 24% to 21% in 
1998, and to 18% in 2002.  In October 2003, the CBTT announced a phased reduction in the reserve 
requirement applicable to commercial banks fro m 18% to 9% of prescribed liabilities over an 
18-month period, and lowered it initially to 14%.  The CBTT also abolished the requirement to maintain non-statutory reserves of 5% of prescribed liabilities in the form of treasury bills.  Reserve 
requirements for non-banking financial institutions were left unchanged.  These measures were 
intended to reduce intermediation margins and unify  the reserve requirements between banks and non-
banks .
6  In September 2004, the CBTT announced a  further reduction in the reserve requirement for 
commercial banks from 14% to 11%.7 
                                                      
3 CBTT Media Release, 22 April 2002, New Operational Framework for the Conduct of Monetary 
Policy.  Available at:  http://www.central-bank.org. tt/communications/mediareleases/mr042202.html. 
4 The CBTT also determines three other rates, with refe rence to the repo rate:  the reverse repo rate, the 
discount rate, and the special deposit rate.  The repo and reverse repo rates define the CBTT's trading band for 
the interbank overnight rate, while the discount rate prov ides a ceiling, and the special deposit rate, a floor, for 
this rate.  See:  International Monetary Fund (2005b).  
5 CBTT Media Release, 22 April 2002. 
6 Ministry of Finance (2004b). 
7 CBTT Media Release, 9 September 2004, Reduction in the Reserve Requirements for Commercial 
Banks.  Available at:  http://www.central-bank.org. tt/communications/mediareleases/mr090904.pdf. WT/TPR/S/151 Trade Policy Review 
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17. The repo rate was left unchanged in 2003 and 2004, but was raised slightly to 5.25% in 
March 2005.8  Nevertheless, the reduction in the reser ve requirement and the active use of open 
market operations to mop up excess liquidity largely created by fiscal operations,  led to a decline in 
commercial banks' interest rates (Table I.3).  S preads for non-banking institutions have been 
increasing, although they are still lower than for commercial banks. 
Table I.3 
Main monetary indicators, 1999-04 
(Annual change) 
 1999 2000 2001 2002 2003 2004a 
Money and credit (end of period % change)        
M1 money supply 5.1 14.1 37.0 9.5 -0.3 14.6 
Broad money supply M2 0.4 6.9 23.2 1.8 6.2 12.1 
Liabilities to private sector M3  9.8 6.7 15.4 -0.2 0.7 6.0 
Banking system:  net domestic credit 14.1 7.8 15.3 6.1 5.8 11.9 
Interest rates       
Central Bank       
Government T-bills 10. 88 10.37 9.69 5. 35 4.80 4.76 
Repurchase (repo) rate n.a. n.a. n.a. 5.25 5.00 5.00 
Commercial banks (weighted average)        
Basic prime rate (period average) 17.04 16.50 15.44 12.42 11.17 9.31 
Foreign currency loans 9.89 10.31 9.43 7.99 6.83 6.49 
Foreign currency deposits 5.18 5.48 4.94 2.75 1.80 1.57 
Spread 4.71 4.83 4.49 5.24 5.03 4.92 
Domestic currency loans 15.92 15.27 14.50 12.80 11.19 9.50 
Domestic currency deposits 6.24 6.03 5.72 3.68 2.48 2.07 
Spread 9.68 9.24 8.78 9.12 8.71 7.43 
Non-banking institutions (weighted average)        
Loans 12.13 11.93 11.60 10.66 9.60 8.92 
Deposits 9.91 9.73 9.43 7.00 6.50 5.47 
Spread 2.22 2.20 2.17 3.66 3.10 3.45 
Legal reserve requirements (% of total liabilities)        
Cash reserve requirement for commercial banks 21.0 21.0 18.0 18.0 14.0 11.0  
Cash reserves maintained 21.2 21.4 17.9 18.2 14.0 11.4  
Liquid assets actually maintained 28.5 30.8 29.9 24.6 22.1 17.3  
Inflation       
Retail price index (period average % change) 3.4 3.6 5.5 4.2 3.8 3.8 
Retail price index (end-of-period % change) 3.4 5.6 3.2 4.3 3.0 5.6 
Core retail price index (less food, end-of -period % change) 2.4 4.2 2.4 2.9 0.9 2.0 
Food price increases (period average % change) 8.6 8.3 13.9 10.2 13.7 12.8 
Exchange rate       
Exchange rate (TT$/US$ mid- point buying/selling, period average) 6.27 6.29 6.20 6.21 6.26 6.27 
Nominal effective exchange rate (period av erage % change) 3.1 3.0 4.6 2.8 -0.9 -1.8 
Real effective exchange rate (period aver age % change) 3.2 2.7 6.9 3.9 -1.3 -2.5 
 
n.a. Not applicable.  
a Data to December 2004 
 
Source:  CBTT online information.  Available at:  http://www.central-bank.org.tt. 
18. The CBTT sterilization operations were successf ul in stabilizing the money supply in 2002 
and 2003, when the broader definition of money, M3, remained virtually unchanged (Table I.3).  
However, the growth of M3 accelerated to a 6% year-on-year rate in 2004, partly reflecting an 
increase in foreign currency deposits. 
                                                      
8 CBTT Media Release, 3 March 2005, Central Bank Raises Repo Rate By 25 Basis Points.  Available 
at:  http://www.central-ban k.org.tt/communications/mediareleases/mr030305.pdf. Trinidad and Tobago WT/TPR/S/151 
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19. The CBTT is an important supplier of foreign exchange to the market, as the Government 
receives energy-related taxes and royalties in foreign currency.  There are six licensed traders, all of 
them commercial banks, and little activity from bureaux de change.  All exchange controls on current 
and capital transactions were abolished in Apr il 1993, and the Trinidad and Tobago dollar was 
allowed to float.  The Central Bank intervenes to limit exchange rate volatility and in practice the 
exchange rate remained within th e TT$6.2-6.3/US$1.0 range between 1999 and 2004.  In recent years, 
the CBTT has actively intervened to sterilize the la rge inflows of foreign exchange stemming from the 
positive developments in the hydrocarbons sector, wh ich could have resulted in a nominal currency 
appreciation.  From 1999 to September 2004, the Trinidad and Tobago dollar accumulated a real 
effective appreciation of 18.3% (Table I.3).  The rece nt rise of the euro helped  adjust this appreciation 
in 2003 and 2004. 
20. In its 2004 Article IV Consultations report, th e IMF raised concerns about competitiveness 
and the appropriateness of the level of the real  exchange rate, noting that while it had been 
depreciating since 2002, the real exchange  rate was still 15% above the 1997 level.9  In the context of 
the consultations, the authorities indicated that, wh ile they were ready to allow the currency to 
depreciate, if necessary, to protect international r eserves, greater exchange rate flexibility would in 
fact lead to an appreciation.  The authorities argued that competitiveness  issues needed to be 
addressed through prudent fiscal policy and structural reforms.10 
21. The use of monetary and exchange rate policy in Trinidad and Tobago has been successful in 
containing inflation (Table I.3).  However, reta il prices have been on an upward trend since early 
2004:  in the 12-month period to March 2005, headline inflation amounted to 7.3% compared with 2.8% in the corresponding period a year earlier.  The increase in prices was triggered mainly by a 
25.6% year-on-year increase in food prices and, to a lesser degree, by strong domestic demand and an effective depreciation of the Trinidad and Tobago dollar.
11  Core inflation measured 2.8% in the 
12-month period to March 2005.  In an attempt to  rein on the acceleration in inflation, the CBTT 
increased the repo rate in March 2005.  
(iv) Fiscal policy 
22. During the period under review, Trinidad and T obago's overall fiscal situation has improved, 
reflecting the Government's prudent fiscal policy stan ce.  In an attempt to keep current expenditure 
under control, the pace of public sector wage increas es has been kept below growth in nominal GDP;  
however, the share of subsidies and transfers in GDP  has increased.  The Government is also in the 
process of designing a reform of the pension syst em, including a fully funded contributory pension 
scheme for government employees.12 
23. One of the most important fiscal policy deve lopments in the period under review was the 
creation of an Interim Revenue Stabilization Fund in  2000.  The aim of the Fund is to provide a 
cushion against any unexpected drop in petroleu m prices, and strengthen the public sector savings 
effort.  The Government has agreed to deposit in the Fund any additional revenues from a base 
petroleum price of US$25 a barrel.  By end 2004 the Fund was awaiting formal establishment, but 
deposits had already been made, and the cumula tive balance was estimated at TT$2.8 billion 
(US$440 million).  Legislation for the formal establish ment of the Fund is expected to be enacted 
during 2005, and would add proceeds from the gas sector, which was not included in the Interim 
Fund.13 
                                                      
9 International Monetary Fund (2005a). 
10 International Monetary Fund (2005a). 
11 Excluding food prices, which tend to be highly volatile and have been the main push for inflation in 
recent years, core inflation averaged so me 1% a year over the same period. 
12 International Monetary Fund (2005b), p. 32. 
13 International Monetary Fund (2005a). WT/TPR/S/151 Trade Policy Review 
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24. The authorities indicate that there are no official fiscal policy targets;  unofficial estimates are 
set for budget purposes at the beginning of the fiscal year.  The Central Government has been posting 
current account surpluses since FY 1999/00 (Table I. 4).  The Central Government's primary balance 
has shown an even larger surplus throughout th e period under review.  The Central Government 
overall accounts shifted to surplus in FY 2002/03, ma inly due to strong energy-based revenue growth, 
but also as a result of improvements in the overa ll efficiency and profitability of state-owned 
enterprises (Chapter III(4)(iv)(b)).  The overall balan ce of the consolidated non-financial public sector 
improved sharply in FY 2002/03, shifting to a surplus, which also contributed to the posting of an overall public sector surplus. 
Table I.4 
Financial accounts of the Central Government, 1998-04 
(Per cent of GDP)  
 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 
Revenue 24.6 24.7 26.5 25.5 27.2 28.7 
Recurrent revenue 24.0 24.6 26.1 25.0 27.2 28.6 
Tax 19.4 20.9 22.4 20.8 23.8 25.1 
Taxes on income and profits 9.6 12.6 14.2 11.9 16.2 16.5 
International trade 1.9 1.6 1.6 1.6 1.7 1.7 
Import duties 1.7 1.5 1.5 1.5 1.6 1.6 
Taxes on goods and services 7.7 6.4 6.3 6.9 5.6 6.1 
Excise duties 2.1 1.7 1.5 1.6 1.6 1.4 
VAT 4.4 3.9 4.1 4.5 3.3 4.1 
Non-tax revenue 4.5 3.7 3.7 4.2 3.4 3.5 
Royalty on oil 1.2 1.1 1.4 1.1 1.6 1.5 
Capital receipts and grants 0.6 0.1 0.4 0.5 0.0 0.1 
Expenditure 25.2 25.3 25.8 25.7 26.1 28.1 
Current expenditure 24.0 22.8 24.1 24.3 24.5 25.8 
Wages and salaries 8.7 6.4 7.0 7.6 7.2 6.1 
Goods and services 2.7 2.5 2.8 3.2 3.2 3.8 
Interest payments 4.7 5.1 4.4 4.4 4.1 3.2 
Subsidies and transfers 7.8 8.8 9.8 9.2 10.1 12.2 
Capital expenditure 1.2 2.5 1.8 1.4 1.6 2.2 
Public Sector Investment Programme 1.1 2.7 2.1 1.7 1.8 2.4 
Central Government cu rrent account balance 0.0 1.8 2.0 0.7 2.7 2.8 
Primary central government balance (excluding 
interest payments) 4.7 6.9 6.4 5.1 6.8 6.0 
Central Government overall balanc e -0.6 -0.6 0.7 -0.2 1.1 0.6 
External financing 2.0 3.3 -1.4 -0.3 0.0 0.0 
Internal financing -1.4 -2.7 0.7 0.5 -1.1 -0.6 
Statutory bodies .. -1.7 -1.7 -0.8 -0.6 -0.9 
Public enterprises  .. 0.8 -1.1 -2.4 0.6 0.4 
Public sector balance .. -1.5 -2.1 -3.0 1.1 0.1 
Memo items       
Fiscal year GDP (million TT$) 41,700.1 49,250.0 54,105.5 55,301.8 63,490.2 70,445.9 
Non-hydrocarbons central government balance (% of 
GDP) -3.2 -6.6 -8.3 -7.3 -8.3 -8.2 
Central Government debt (% of GDP) 44.1 42.1 37.1 37.3 33.8 31.0 
Gross public sector debt (% of GDP) 56.1 54.4 55.0 59.3 55.9 52.7 
Central Government debt service (% of exports of 
goods and non-factor services) 20.4 12.1 16.6 14.0 4.6 5.7 
 
.. Not available.  
Note: There may be slight differences in the totals due to r ounding off.  Fiscal years run fr om 1 October to 30 September. 
 
Source: WTO Secretariat based on information pr ovided by the Ministry of Finance. Trinidad and Tobago WT/TPR/S/151 
 Page 9 
 
 
25. The taxation system is heavily depende nt on taxes on the hydrocarbons industry 
(see Chapter III(4)(i)), which account for some 40% of  total revenue.  The share of taxes in total 
revenue, in particular taxes on income and profits , has increased substantially since FY 2002/03 on 
account of the increase in production and prices in the hydrocarbons sector.  Although there has been 
an overall public sector surplus since FY 2002/03,  the non-hydrocarbons sector fiscal balance has 
been in deficit throughout the period under review.  This deficit reached 8. 2% of GDP in FY 2003/04, 
and is an important contributor to the liquidity build-up in the economy.14 
26. The public debt ratio fell during the period unde r review, from 56.2% of GDP in FY 1998/99 
to 52.6% in FY 2003/04, mainly triggered by a stro ng reduction in Central Government debt.  Public 
sector external debt declined by 8 percentage points of GDP in the 1999-03 period to about 15% of 
GDP at end 2003;  most of the debt is long-te rm and from commercial creditors (Table I.5).  The 
external debt service declined from 20.4% of expor ts of goods and non-factor services in FY 1998/99 
to 5.7% in FY 2003/04.  
(v) Balance of payments 
27. The current account surplus rose by over 13 percentage points of GDP, to 14.2% of GDP, 
between 1999 and 2004 (Table I.5), as a result of hi gher petroleum prices and an increased volume of 
natural gas exports.  Exports from the hydrocarbons sector  are responsible for this surplus:  the rest of 
the economy posts a current account deficit. 
28. Due to the extent of its exports of hydrocar bons and related products, Trinidad and Tobago 
traditionally posts a merchandise trade surplus.  Exports more than doubled between 1999 and 2004, 
to reach US$6.4 billion;  exports of natural gas a nd petrochemicals increased particularly fast.  
Merchandise imports also increased rapidly durin g the period under review, expanding by 78% 
between 1999 and 2004.  The capital-intensive nature  of the hydrocarbons sector triggers strong 
imports of capital goods when there is an investme nt boom in the sector, as experienced in the past 
few years. 
29. Traditionally, the balance of non-factor services posts a surplus, primarily from travel, 
transportation, and insurance.  Th is surplus has been increasing since 2000.  The deficit in investment 
income reflects remittances of pr ofits and dividends by companies, especially in the hydrocarbons 
sector, as well as interest payments abroad. 
30. Trinidad and Tobago's capital and financial account  is dominated by direct investment flows, 
which increased substantially be tween 2000 and 2004, when they reached just under US$1 billion, 
mainly directed to the hydrocar bons sector.  The capital account has registered a deficit since 2002, 
peaking at some 10% of GDP in 2004 in the context of large bond issues by regional governments and 
corporations, and an increase in outward foreign direct investments, particularly to other CARICOM 
countries.  Due to the large current account surplus,  and despite a deficit in the capital account, there 
has been a substantial accumulation of gross foreign ex change reserves, which stood at US$3 billion 
at end 2004, equivalent to over 6.9 months of imports. 
                                                      
14 Central Bank of Trinidad and Tobago (2004b). WT/TPR/S/151 Trade Policy Review 
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Table I.5 
Balance of payments, 1999-04  
(US$ million, unless otherwise indicated) 
 1999 2000 2001 2002 2003 2004b 
Current account balance (% of GDP) 0.4 6.6 5.0 0.8 9.3 14.2 
Current account balance 31 544 446 76 985 1,488 
 Merchandise trade balance 64 969 718 238 1,293 1,509 
  Exports f.o.b. 2,816 4, 290 4,304 3,920 5,205 6,403 
    Petroleum crude and refined 1,524a 2,002 1,613 1,459 1,963 2,305 
   Gas  .. 737 937 869 1,507 1,794 
   Petrochemicals 529 744 815 647 907 1,253 
   Other 761 808 939 944 828 1,051 
  Imports c.i.f. 2,752 3, 322 3,586 3,682 3,912 4,894 
   Fuel imports .. 1,072 907 1,019 1,064 1,521 
   Capital goods 1, 246 1, 016 1,251 1,276 1,257 1,826 
   Other .. 1,234 1,428 1,388 1,591 1,847 
 Non-factor services balance 329 166 233 264 314 671 
  Transportation 81 34 91 85 85 245 
  Travel 127 66 50 56 142 332 
  Communication 103 31 24 25 36 40 
  Insurance 24 46 71 100 108 113 
  Other government -10 -14 -10 -6 -23 -42 
  Other services 5 3 -11 -7 -39 -17 
 Balance on goods and services 393 1,135 952 502 1,607 2,180 
 Income balance -400 - 629 -539 -480 -681 -446 
 Transfers (net) 38 38 33 55 59 54 
Capital and financial account 132 - 103 25 -28 -6,517 -1,054 
 Official, medium and long-term (net) 110 54 -50 -61 -44 -213  
   Disbursements 295 384 27 18 26 23 
    Amortizations -176 -270  -61 -69 -90 -226  
    Other -18 -60 -16 -10 -10 -10 
 Direct investment (net) 379 654 777 684 583 973 
     Inward 643 680 835 791 808 1,001 
     Outward -264 -25 -58 - 106 -225 -200 
 Commercial banks (net) 74 -86 257 -79 94 - 524 
   Regional bonds -178 -30 - 206 -40 -500 -690 
 Other private investment, net -395 - 364 -350 -145 -600 -354 
     of which net errors and omissions 91 -338 -402 -356 145 - 473 
Overall balance  162 441  471 49 334 734 
Change in foreign exchange reserves (net) -162 - 441 -471 -49 -334 -734 
Memorandum items        
Net international reserves (US$ million) 950 1, 388 1,858 1,907 2,242 2,977 
Gross official reserves 964 1,405 1,876 1,924 2,258 2,993 
Gross official reserves in months of goods imports 3.1 4.3 5.10 5.5 5.4 6.9 
External debt/GDP (%) 23.2 20.5 18.5 16.7 14.4 11.8 
Debt service ratio/exports of goods a nd services 8.0 7.9 3.4 4.4 3.5 4.6 
 
.. Not available. 
 a Includes gas for 1999. 
b Provisional. 
 Note: A minus sign indicates a gain in reserves. 
 
Source : Central Bank of Trinidad and Tobago (2004a);  Central Statistical Office;  and In ternational Monetary Fund 
(2005a), and (2005b). Trinidad and Tobago WT/TPR/S/151 
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(3) TRADE AND INVESTMENT FLOWS  
(i) Developments in merchandise trade 
31. Trinidad and Tobago is the largest trader in  the English-speaking Caribbean.  Between 1998 
and 2003, total merchandise trade grew at an averag e annual rate of 11.7%.  This was largely due to 
the increase of exports of hydrocarbons, which benefited from higher international prices and the 
increase in natural gas production.  Merchandise e xports in U.S. dollar terms grew at an annual 
average rate of 18.3% over the 1998-03 period, while imports grew at an average of 5.5% (Tables AI.1 to AI.4). 
(a) Composition of trade 
32. Due to the boom in the hydrocarbons industr y, the composition of exports has undergone 
some changes during the period under review.  While exports were distributed almost equally between 
manufactures and fuels in 1998, the share of fuel s had increased to 66.7% of total exports in 2003 
(Table AI.1).  As a consequence, the share of prim ary products increased strongly to reach more than 
71% of total exports, with agriculture accounting for just 4.5% of total exports.  Exports of 
manufactures also showed a relative decline, to 28.6% in 2003, although they increased sharply in 
absolute terms.  Chemic als remained the major category of ma nufactured exports, with more than 
17% of the total in 2003. 
33. The composition of imports was subject to the same overall evolution as exports, including a 
substantial increase in the share of fuels, in partic ular petroleum (Table AI.2).  Petroleum's share of 
total imports increased to 24.4% in 2003, as Trinid ad and Tobago's refining activities, for which it 
uses partly imported petroleum, increased during 1998-03 (Chapter IV(3)).  Manufactures, despite 
posting a reduction of 22 percentage points over the period, continued to account for the largest share 
of imports, at some 60% of the total in 2003.  Machinery and transport equipment remained the main imported product group, with aroun d 32% of total imports in 2003. 
(b) Direction of trade 
34. The direction of exports at the regional leve l remained relatively stable between 1998 and 
2003.  Trading partners in the Americas maintained  their share of 88% of Trinidad and Tobago's 
exports, while that of Europe declined slightly, to about 8% (Table AI.3).  The United States 
consolidated its position as the major individual ma rket for Trinidad and Tobago's exports, its share 
increasing to almost 55% in 2003.  This was partly due  to Trinidad and Tobago's extensive use of the 
Caribbean Basin Initiative (CBI) benefits, and to the increase in exports of natural gas to the U.S. 
market.  The share of other countries in the Am ericas declined from 47.8% to about 33%, Jamaica 
appearing as the single most important other de stination, accounting for some 7% of exports 
(Table AI.3). 
35. Despite a reduction in its share over the 1998-03 period, the United States remained the main 
supplier of merchandise imports to Trinidad and Tobago with about 30% of the total in 2003.  On 
account of this decline, the share of the Americ as fell from 71% to 58% over the period.  Among 
other countries in the Americas, the share of Brazi l increased to 9%, to become the second single 
largest source of imports.  The European Union's sh are of imports increased slightly, to 18% in 2003, 
while Asia's share stayed stable, at some 10%.  Africa's share of total imports by Trinidad and Tobago increased from 0.2% in 1998 to 11% in 2003:  Gabon and Nigeria accounted for 5% and almost 3% of 
total imports, respectively.  Imports from these count ries consist mainly of petroleum to be processed 
in Trinidad's refinery (Chapter IV(3)(i)). WT/TPR/S/151 Trade Policy Review 
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(ii) Trade in services 
36. Trinidad and Tobago runs a traditional surplus in trade in services, which, after a decline in 
2000, has resumed an increasing trend.  In 2004,  the surplus in services totalled US$671 million 
(Table I.5).  Most service categories post surpluses:   the highest are in travel and transportation, 
followed by insurance.  More disaggregated informat ion for 2003, the latest av ailable year, shows that 
transportation receipts remained relatively stable in the 1999-03 period, while insurance receipts were 
2003 on the rise (Table I.6).  On the payments side, there has been an increase in the travel, 
Government, and other services categories. 
Table I.6 
Trade in services, 1999-03 
(US$ million) 
 R P R P R P R P R P 
 1999 2000 2001 2002 2003 
Total 603.1 274.0 553.8 387.7 603.6 370.0 657.0 373.0 685.2 371.4 
Transportation 204.4 123.6 207.6 173.2 207.3 116.6 202.5 117.4 246.5 161.3 
Travel 209.6 82.8 212.8 147.1 200.9 151.0 243.0 186.3 248.9 107.2 
Insurance services 27.9 3.9 45.8 0.1 78.6 8.1 99.8 0.2 108.3 0.1 
Communication services 111.4 8.6 36.3 5.5 29.8 5.6 29.9 5.4 39.5 3.5 
Other government  10.8 20.9 10.6 24.5 40.4 30.9 38.9 32.7 13.3 36.4 
Other services  39.1 34.2 40.7 37.3 46.6 57.8 23.9 31.0 28.8 62.9 
 
Note: R:  receipts;  P:  payments. 
 
Source : Central Bank of Trinidad and Tobago. 
(iii) Foreign direct investment 
37. The stock of foreign direct investment (FDI) h as increased substantially during the last decade 
more than doubling between 1995 and 2003, to reach some US$9.5 billion, or over 90% of GDP in 
2003 (Table I.7). 
Table I.7 
FDI stock, 1980-03 
(US$ million and per cent of GDP) 
          1980         1985         1990         1995        2000         2002         2003 
 S  P  S  P  SP SP SP SP  S P
Inward 976 15.7 1,719 23.3 2,093 41.3 3,634 68.8 7,042 86.4 8,667 98.6 9,475 90.2
Outward 0 0.0 15 0.2 22 0.4 24 0.5 397 4.8 562 6.0 787 7.5
 
S:  stock in US$ million;  P:  percentage of GDP. 
 
Source:  UNCTAD (2005), World Investment Report , and Central Bank of Trinidad and Tobago.  Inward investment for 
 2003 estimated from bala nce-of-payments figures. 
38. Direct investment totalled US$3.7 billion in th e 1999-03 period, and is estimated to have 
exceeded US$1 billion in 2004 (Table I.5).  Investment in the hydrocarbons industry, including the 
opening of large-scale projects such as two new lique fied natural gas plants (Chapter IV(3)) accounts 
for most of the inflows in recent years.  Cumu lative FDI in the energy sector over 1999-03 was some 
US$3.4 billion.  Apart from investment in hydrocar bons, the main FDI flows have been in iron and 
steel, and other manufacturing, insurance, and banking.  The main foreign investors are the 
United States, the United Kingdom, Germany, India,  and Canada;  the first two accounted for 47% 
and 37% of total FDI in 2003.  These estimates include a number of joint foreign investment projects and partnerships between the Trinidad and Tobago Government and foreign investors. Trinidad and Tobago WT/TPR/S/151 
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(4) OUTLOOK  
39. The Government is forecasting annual growth of some 7.2% over the 2005-07 period;  the 
hydrocarbons sector is expected to be the main contributor, expanding at annual average of 9% over 
the period, while the non-energy sector is expected to grow at some 4% a year.15  Core inflation is 
expected to stay at around 3% over the medium term, and the unemployment rate is expected to 
remain at single-digit levels.  Supported by an in crease in exports of both energy and non-energy-
related goods, and despite rising imports, the surp lus in the current account of the balance of 
payments is estimated to remain large, some 9. 5% of GDP by 2007, leading to an accumulation in 
gross foreign exchange reserves.  Due to an increase in amortizations, the public sector external debt 
is expected to decline, from US$1.63 billion in 2003, to US$1.37 billion in 2007. 
40. The IMF is expecting the economy the grow by 6.3% in 2005, and inflation to be at 3.1%.  
Growth is expected to accelerate in 2006, but deceler ate thereafter, and inflation is expected to remain 
stable at around 3%.  Both the Central Governme nt's overall balance and the current account of the 
balance of payments are expected to re main in surplus over the 2005-09 period. 
                                                      
15 Ministry of Finance (2004d).