PORT OF SPAIN, Trinidad - The International Monetary Fund (IMF) Tuesday said that economic growth is expected to remain subdued in the near term before gradually recovering over the medium term.
The Washington-based financial institution which ended a two-week staff mission here on Monday, said that the country’s economy is gradually recovering to pre-pandemic levels amid persistent headwinds.
The mission led by Ana Guscina, said that the non-energy sector, particularly manufacturing and services, has underpinned recent growth, but stagnant production in the mature energy sector has weighed on activity Inflation and unemployment are low, the banking sector appears sound, and private sector credit growth is robust.
It said that the current account (CA) balance remains in surplus, though the external position has weakened and foreign exchange shortages persist.
Guscina said that foreign reserves remain adequate, with coverage at 6.4 months of prospective imports and that the Heritage and Stabilization Fund (HSF) assets continue to provide an additional sizeable buffer standing at US$6.38 billion as of February this year.
She said that the new Kamla Persad Bissessar government, which came to office in April last year, is focusing on revitalising the energy sector through facilitating work on mature fields, deepwater exploration, and fostering regional collaboration with Suriname, Guyana, and Venezuela.
“They are also striving to lift non-energy growth through greater emphasis on improving the business environment, encouraging trade and foreign direct investment, and promoting economic diversification.”
But the IMF noted that the fiscal deficit in the 2025 financial year remained high and public debt has risen. It said that the overall deficit of the central government for the financial year 2025 is estimated at 5.5 per cent of gross domestic product (GDP) compared with 5.9 per cent of GDP in the previous financial year.
The IMF said this was due to the windfall from a tax amnesty, improved energy revenues, and contained spending on wages and capital spending more than offset a drop in non-tax revenue and increases in expenditure on goods and services and in transfers and subsidies. The non-energy central government primary deficit widened from 14.2 per cent of non-energy GDP in the previous financial year to 14.9 per cent last year.
The country retains investment-grade sovereign credit ratings and international market access. In September 2025, the Us-based Standard and Poor’s affirmed the BBB- rating, while revising the outlook to negative.
In December 2025, Moody’s maintained its Ba2 rating but also downgraded the outlook to negative. CariCRIS continues to assign an AA rating, the highest in the Caribbean.
In January 2026, the government successfully issued a one billion US dollar 10-year international bond and the issuance was 2.5 times oversubscribed.
But in its macroeconomic outlook for the country, the Washington-based financial institution said that the economic growth is expected to remain subdued in the near term before gradually recovering over the medium term.
It said that the economy is estimated to have grown by 0.8 per cent in 2025, driven by non-energy sectors. Real GDP growth is projected to moderate to 0.7 per cent this year, as stronger growth in the non-energy sector partly offsets an anticipated decline in energy production.
Guscina said medium-term growth prospects are expected to improve as several new energy projects, most notably Manatee, come onstream, lifting growth to around 2.9 per cent in 2027 and 3.5 per cent in 2028.
Inflation is projected to hover around two percent in the near to medium term, broadly in line with international trends.
The current account is projected to remain in surplus and is expected to improve to three per cent of GDP in 2025, reflecting a modest increase in energy exports and a decline in goods imports.
Over the medium term, the CA surplus is projected to average about four per cent of GDP, with the IMF indicating that the CA is assessed as moderately weaker than fundamentals.
Guscina said that the economic outlook is subject to considerable uncertainty, and the balance of risks is tilted to the downside in the near term and to the upside in the long term.
She said domestic risks to growth and the external sector stem from lower oil and gas production, which could result from disruptions in mature fields or delays in new projects. “Policy slippages and persistent foreign exchange shortages may weaken market confidence. Externally, elevated global uncertainty, trade disruptions, tighter global financial conditions, and regional geopolitical tensions pose additional risks.
“On the upside, faster progress on structural reforms and higher energy prices could strengthen economic activity and boost fiscal revenues,” Guscina said, adding that there is a positive momentum in the energy sector with deepwater exploration activity and potential regional agreements, which are not included in staff’s baseline until final investment decisions are announced.
“There are also upside risks to non-energy growth from private investment in the government’s Revitalization Blueprint.”
The IMF said that the 2026 national budget introduces important measures to strengthen fiscal revenues, fiscal management, social protection, and economic diversification.
It said the fiscal package targets an overall fiscal deficit of 2.2 per cent of GDP, which entails an ambitious consolidation.
“The budget includes an asset levy on banks and insurers, surcharges on landlords and commercial electricity consumption, and higher excise duties and fees. Additionally, the National Gas Company is expected to increase its dividend payments to the government, reflecting improved retained earnings from cost cutting measures and the higher gas prices it announced for its light industrial and commercial customers.
“Together with tax administration measures to fully staff and modernise the Inland Revenue Division and Customs, these should help strengthen non-energy revenue collection. At the same time, the budget expands targeted support for agriculture, housing, and vulnerable groups,” Guscina added.
