Primary Catalysts Fueling Trinidad and Tobago's Economic Dynamics
Trinidad and Tobago (T&T) has undergone a profound economic transformation in the past decade, driven primarily by exponential growth in its natural gas production and a substantial upswing in petrochemical exports. The energy sector's proceeds have become a pivotal cornerstone, significantly bolstering T&T's overall GDP, governmental income, and foreign currency inflow.
In addition to its historically energy-dependent fiscal landscape, T&T's administration has orchestrated a series of strategic endeavors to usher in a new era of economic diversity. Central to this shift, the manufacturing domain is reaping substantial benefits from government-induced incentives that deftly slash operational costs and mitigate business impediments. Concurrently, the government remains steadfast in its commitment to entice both domestic and international investors with a penchant for venturing into tourism-centric enterprises.
The Success of Trinidad
Trinidad and Tobago (T&T) has harnessed its energy sector prowess to attain one of the most noteworthy per capita incomes in the Latin American region. With economic expansion averaging above 8% annually from 2000 to 2007, T&T outstripped the regional norm of approximately 3.7%. However, the nation witnessed a GDP contraction during 2009-2012, followed by a slight uptick in 2013, only to face renewed contraction from 2014 to 2017. Despite possessing substantial foreign reserves and a sovereign wealth fund equivalent to one and a half times its national budget, T&T navigates a recessionary period marked by gas scarcities and depressed prices. Notably, significant energy undertakings are curbing the gas supply challenges, as reported by Moody's Analytics.
The Energy Sector
The bedrock of T&T's economy lies within its energy production and downstream industrial endeavors. Oil and gas traditionally contribute around 40% to the GDP and 80% to exports, yet merely 5% to employment. A standout is the mammoth natural gas liquefaction facility in the Western Hemisphere, with gas generating approximately two-thirds of government revenue within the energy sector. The United States, acting as T&T's principal trading partner, constitutes 28% of imports and receives 48% of exports.
By 2019, T&T's proven crude oil reserves dwindled to approximately 200 million barrels from the earlier 700 million in 2016, partly attributed to diminished exploration activity. As of 2019, the estimated sum of proven, probable, and possible natural gas reserves stood at 10.2 trillion cubic feet. The nation engages in diverse energy and petrochemical pursuits encompassing liquefied natural gas (LNG) and crude oil production. While once largely dependent on the U.S. market (almost 90% of LNG sales), T&T had to explore new global markets post the U.S. shale revolution. Furthermore, T&T is a substantial producer of ammonia, urea ammonium nitrate (used as fertilizer), and urea, alongside being a major global exporter of methanol.
T&T's economic tapestry is woven from four primary sectors, all trailing energy in their contributions. According to official records, manufacturing accounted for 18% of total GDP in 2017, followed by mining and quarrying at 19.1%, trade and repairs at 15.6%, and financial and insurance activities at 10.1%. The government's 2017 economic review anticipated growth (4%) in the finance and insurance sector and the transport and storage industry (7%) for the years 2016 to 2017.
Cultivating economic variety stands as a paramount agenda for the administration, with a pronounced emphasis on sectors like tourism, agriculture, information technology, and maritime transport. Regrettably, the journey towards diversification has encountered hurdles erected by governmental bureaucracy and instances of corruption. Underpinning this drive, the Trinidad and Tobago government has channeled substantial resources into bolstering infrastructure and propelling foreign direct investments, notably concentrating efforts towards Tobago.
Benefitting from cost-efficient energy resources and advantageous proximity to Latin America and the Caribbean, T&T has attracted the attention of enterprises like Unilever's Caribbean branch and West Indian Tobacco. Capitalizing on these favorable conditions, the administration aspires for more foreign corporations to embrace similar pathways.
Elevated by a robust energy sector, T&T's economic vitality has surged. Nevertheless, the nation remains vulnerable to the ripples of commodity market fluctuations. These vulnerabilities can be tempered by an augmented thrust towards economic diversification. Amidst its tropical island setting, T&T has untapped potential in tourism, a sector capable of yielding a substantial share of the country's revenue. The tourism domain presents an avenue through which T&T can lay the foundation for a more enduring economic landscape.