IMF: Trinidad and Tobago’s economy recovering slowly but challenges remain

The International Monetary Fund (IMF) says Trinidad and Tobago’s economy is gradually recovering but still faces challenges, including slow growth in the energy sector, rising public debt and ongoing foreign exchange shortages.

In a statement issued at the end of its 2026 economic review mission, the IMF said the country has been returning to pre-pandemic levels of activity, supported mainly by growth in manufacturing and services. However, weak oil and gas production has continued to weigh on overall performance.

Inflation and unemployment remain low, the banking system is stable and private sector lending is growing. The country is also still earning more from exports than it spends on imports, and foreign reserves remain at comfortable levels, covering more than six months of imports. The Heritage and Stabilization Fund, which stood at about US$6.38 billion as of February 2026, also provides a financial cushion.

The IMF noted that a new administration that took office in May 2025 has been pursuing policies to revitalise the economy, including boosting energy production, encouraging foreign investment and diversifying into areas such as agriculture, tourism and the creative economy.

Slow growth expected in short term

Economic growth is expected to remain modest in the near term. The IMF estimates the economy grew by 0.8 percent in 2025 and projects growth of about 0.7 percent in 2026. Stronger expansion is expected from 2027 as new energy projects come on stream, with growth projected to rise to nearly three percent in 2027 and 3.5 percent in 2028.

Inflation is expected to remain around two percent in the coming years.

However, the IMF warned that risks remain. Lower oil and gas output, delays in energy projects and continued foreign exchange shortages could slow growth. Global uncertainty and tighter financial conditions could also affect the economy. On the positive side, higher energy prices or faster reforms could boost revenue and growth.

Debt and deficit still high

The IMF said government finances remain under pressure, with public debt rising and deficits still elevated.

The fiscal deficit for the 2025 financial year was estimated at 5.5 percent of gross domestic product (GDP), while central government debt climbed to 67.8 percent of GDP. Total public sector debt reached 84.2 percent of GDP.

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While the government’s 2026 budget includes measures to raise revenue and support vulnerable groups, the IMF said stronger efforts will be needed to reduce debt and rebuild financial buffers. It recommended additional steps such as broadening the tax base, improving spending efficiency and better targeting subsidies while protecting low-income households.

Foreign exchange and policy changes

The IMF also highlighted ongoing foreign exchange shortages, noting that maintaining the current exchange rate system has required regular sales of foreign currency. It suggested tighter fiscal and monetary policies to support the system, or eventually allowing greater flexibility in the exchange rate to help improve foreign currency availability and support investment.

Despite these challenges, the IMF said Trinidad and Tobago’s financial sector remains stable and well-capitalised, with low levels of bad loans.

Diversification and reform key

Looking ahead, the IMF stressed the importance of diversifying the economy beyond oil and gas to ensure long-term stability and growth. It welcomed government plans to expand agriculture, tourism, the creative sector and technology-driven industries, while improving the business environment and supporting small businesses.

The IMF also urged reforms to boost workforce participation, reduce informal employment and strengthen digital and technological skills.

Overall, the IMF said while Trinidad and Tobago is on a path of gradual recovery, stronger fiscal discipline, continued reforms and economic diversification will be key to improving growth and resilience in the years ahead.