s151-1_e.doc - Trinidad and Tobago I ECONOMIC ENVIRONMENT(1 OVERVIEW WT\/TPR\/S\/151 Page 1 1 Trinidad and Tobago's economy has undergone a period of

s151-1_e.doc - Trinidad and Tobago I ECONOMIC ENVIRONMENT(1...

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Trinidad and Tobago WT/TPR/S/151 Page 1 I. ECONOMIC ENVIRONMENT (1) O VERVIEW 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 hydrocarbons sector. Per capita income has increased substantially during the period under review, to over 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 wage growth, partly reflecting the strong growth in capital-intensive industries. 2. Trinidad and Tobago's overall fiscal situation has improved, and current expenditure has been kept under control; the Central Government has 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 cushion against any unexpected drop in petroleum prices, and strengthen the public sector savings effort. 3. Growth in domestic prices has been contained 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 D EVELOPMENTS (i) Economic structure 4. During the period under review, the economy of Trinidad and Tobago has increased its reliance in the hydrocarbons sector (petroleum, natural gas, and petrochemicals). This sector directly generates over one third of GDP (Table I.1) and two thirds of merchandise 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 goes 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 the 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 important as in other CARICOM countries; however, its indirect contribution to economic activity appears significant (Chapter IV(6)(vi)).
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