Moodys gives Trinidad stable outlook

International credit rating agency, Moody's Investors Service, has affirmed Trinidad and Tobagos Baa1 government bond rating, saying that the twin-island republics economic outlook remains stable.

The Wall Street-based Moodys said the key drivers of the rating action are continued resilience of the government's balance sheet, despite some deterioration of government debt metrics, significant fiscal savings in a sovereign wealth fund and a strong external position supported by persistent current account surpluses and a large foreign exchange reserve buffer.

In addition, Moodys said a challenging growth outlook contingent on the resumption of activity in the energy sector following a protracted recession contributed to the rating action.

The rating agency said the sovereign rating continues to be supported by the government's robust balance sheet, fiscal savings, and a strong external liquidity position that mitigate susceptibility to event risk; a solid institutional framework with a high degree of policy coherence and continuity; and relatively high income per capita.

Moodys, however, said that the rating is constrained by the small size of the economy, a limited degree of diversification, concerns about medium-term growth prospects and the relative deterioration of fiscal and debt metrics.

It said the execution of public sector capital projects has been weak while current expenditure has increased, driven by wages and transfers to public enterprises.

As a result, Moody said the Trinidad and Tobago government debt increased to 46.9 per cent of Gross Domestic Product (GDP) in 2012 from 23.4 per cent in 2008.

It added that more than half of the increase, about 13 per cent of GDP, was due to domestic debt issued to settle fiscal liabilities, stemming from the bailout of CL Financial, a systemically important financial conglomerate that collapsed in 2009.

Moodys said that although it expects the fiscal deficit to average around five per cent of GDP in 2013/14, compared to an average surplus of 1.3 per cent in 2004-2008, the rate of government debt accumulation should moderate in the coming years.

CMC