Trinidad and Tobago’s economy contracts in Q1 2025

Trinidad and Tobago’s economy shrank in the first quarter of 2025, with both energy and non-energy sectors posting declines, according to the Central Bank’s September Monetary Policy Announcement.

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The Bank maintained its repo rate at 3.50 per cent, warning that growth prospects remain fragile despite low inflation and stable domestic prices.

Citing data from the Central Statistical Office (CSO), the Central Bank reported that real GDP contracted by 2.1 per cent year-on-year in the first quarter. Output fell 4.8 per cent in the energy sector and 1.0 per cent in the non-energy sector, reflecting weakness across key industries.

Preliminary figures for the second quarter show a mixed picture. Natural gas production slipped 2.1 per cent year-on-year, while crude oil output rose slightly by 0.3 per cent. Petrochemical production was uneven, with ammonia and urea output climbing 6.9 per cent and 26.7 per cent, respectively, but methanol plunging 28.1 per cent.

Non-energy activity remained sluggish. The Bank said a slowdown in the distribution sector and tepid construction and manufacturing activity likely dampened growth heading into mid-year. “While inflation is likely to remain low, growth prospects are fragile,” the Central Bank cautioned, pointing to softer labour conditions, potential adjustments in government programmes, and uneven energy gains from new natural gas fields.

Despite the weak growth outlook, inflation remains contained. Headline inflation stood at 1.4 per cent year-on-year in August, unchanged from three months earlier. Core inflation edged up to 1.0 per cent, while food price increases eased to 2.9 per cent due to falling vegetable prices. Building material prices rose 2.4 per cent, and wholesale prices increased 1.2 per cent in the second quarter.

Liquidity in the financial system tightened to $3.9 billion in September from $4.2 billion in August, driven by robust credit growth, government financing operations, and Central Bank foreign exchange sales. Private sector credit expanded 7.7 per cent in July, down from 9.1 per cent in April, with business lending up 8.1 per cent and consumer credit up 9.9 per cent. Real estate mortgage loans grew 6.3 per cent.

External pressures also weigh on the outlook. Crude oil prices averaged US$64.08 per barrel in August, down from US$75.55 a year earlier, while natural gas benchmarks slipped amid a global slowdown and geopolitical tensions. The International Monetary Fund projects global growth to slow to 3.0 per cent in 2025, from 3.3 per cent in 2024.

Global monetary easing, including the U.S. Federal Reserve’s September rate cut to 4.00–4.25 per cent, has narrowed interest rate differentials with Trinidad and Tobago, even as local short-term treasury yields rise with tighter domestic liquidity.

Given these conditions, the Monetary Policy Committee opted to keep the repo rate unchanged. The next policy announcement is scheduled for December 31, 2025.