WASHINGTON, DC – The International Monetary Fund (IMF) says the economic growth in Trinidad and Tobago is projected to remain at around 0.8 per cent in 2026, and will strengthen over the medium term supported by new energy projects and continued momentum in the non-energy sector.
The IMF executive board, which has just completed the Article IV Consultation for the Caribbean country, said that economic activity continued its gradual recovery in 2025, with real gross domestic product (GDP) growth moderating to 0.8 per cent and inflation returning to low, pre-pandemic levels.
It said at the same time, persistent fiscal deficits led to an increase in public debt and that the current account balance remained in surplus, and while international reserves are trending downwards.
The IMF said that reserves are supplemented by substantia l-25 per cent of GDP- liquid assets in the Heritage and Stabilisation Fund (HSF).
It said that credit growth remained steady and the banking system stayed well-capitalized, underscoring continued financial sector resilience.
Looking ahead, the IMF executive board said inflation is expected to rise temporarily to around 3.1 per cent in 2026, reflecting global commodity price developments, before stabilising around two per cent over the medium term.
“The overall fiscal deficit is expected to decline to 4.6 per cent of GDP in 2026 from 5.5 per cent in 2025, and international reserves are expected to remain adequate at about 5.5 months of imports.
“Higher energy prices are expected to support fiscal and external balances in the near term, while the authorities’ ongoing revenue and expenditure reforms, and new energy projects coming on stream underpin a gradual improvement in the fiscal and external positions over the medium term,” the IMF said.
It noted also that the outlook is subject to significant uncertainty, including due to the impact of the war in the Middle East.
Delays in new energy projects or disruptions to production from mature fields could weigh on growth, while faster implementation of reforms under the Revitalisation Blueprint and sustained investment could lift medium-term growth prospects.”
The IMF executive board said while it welcomed Trinidad and Tobago’s continued economic recovery, low inflation, and healthy banking system, the economic outlook is however subject to elevated uncertainty, including through the impact of the war in the Middle East.
The board is encouraging the authorities to address underlying macroeconomic vulnerabilities through prudent fiscal and monetary policies and persevere in diversifying the economy and strengthening its resilience to shocks.
Directors noted that persistent fiscal deficits have led to an increase including by enhancing revenue mobilization, rationalizing spending, and improving investment efficiency, and emphasised that a stronger sustained fiscal consolidation effort, while protecting the most vulnerable, is needed to place public debt on a credible downward path and preserve external stability.
“In this regard, Directors emphasised the importance of closing tax gaps, reducing non-priority transfers, and improving the targeting of social programmes. They stressed that higher-than-budgeted energy revenues should be primarily used to rebuild buffers, including through resumed deposits into the Heritage and Stabilization Fund.”
The IMF welcomed Trinidad and Tobago’s efforts to strengthen fiscal institutions and address fiscal risks. They commended the authorities for the courageous reforms to the National Insurance System (NIS) and called for further steps to improve the long-term sustainability of the public pension system.
They also welcomed Port of Spain’s decision to adopt a medium-term fiscal framework anchored by a well-designed fiscal rule and a credible debt anchor to manage volatile energy revenues and ensure intergenerational equity.
They concurred that monetary and financial sector policies should continue to support stability. They generally supported moving the policy rate toward a neutral stance to remove the negative interest rate differential with the United States and stabilise capital outflows.
“Against the background of declining reserves, Directors also called for efforts to improve the functioning of the foreign exchange market and, over time, move toward greater exchange rate flexibility with appropriate supporting measures.
“They encouraged continued vigilance over the growing sovereign-financial nexus and emerging cyber-security and climate risks.
The IMF said that the next Article IV consultation with Trinidad and Tobago will be held on the standard 12-month cycle.
