Trinidad and Tobago
Economic Developments and Selected Background Issues

This paper examines economic developments in Trinidad and Tobago during 1990–94. Economic activity in 1992–93 was severely affected by a fall in output in the oil/gas sector, a sharp drop in the average oil export price, and persisting weakness in the nonpetroleum sector. As a result, real GDP declined further by a cumulative 3½ percent in the two-year period, and unemployment rose to more than 20 percent. Real domestic expenditure fell by 3½ percent a year, with declines in both consumption and investment.

Abstract

This paper examines economic developments in Trinidad and Tobago during 1990–94. Economic activity in 1992–93 was severely affected by a fall in output in the oil/gas sector, a sharp drop in the average oil export price, and persisting weakness in the nonpetroleum sector. As a result, real GDP declined further by a cumulative 3½ percent in the two-year period, and unemployment rose to more than 20 percent. Real domestic expenditure fell by 3½ percent a year, with declines in both consumption and investment.

I. Introduction

The Republic of Trinidad and Tobago is comprised of two islands in the South East Caribbean, separated by a channel that is 31 kilometers wide. Trinidad--the larger island--is situated about 12 kilometers off the northeast coast of Venezuela and occupies an area that is approximately 4,820 square kilometers. The major cities, including the capital, Port-of-Spain, lie near the coastlines. The area of the island of Tobago is about 300 square kilometers, with numerous sandy beaches. The resident population of the country is about 1.27 million, with 1.20 million living in Trinidad and the remainder in Tobago. The resident population increased by about 4 percent between the census of 1985 and the most recent one in 1990. Per capita GDP is estimated at US$3,881 in 1994, significantly above that in the other Caribbean countries except Antigua and Barbuda and St. Kitts and Nevis. Trinidad and Tobago became independent in 1962 and has a parliamentary system of government; the present government came to power in 1991.

The economy is highly open, with exports and imports equivalent to about 34 percent of GDP and 23 percent of GDP, respectively. Trading is mainly with the United States, other member countries of the Caribbean Community (CARICOM), the United Kingdom, and Latin America. The economy depends largely on the production and export of crude oil, oil products and petrochemicals which together account for 25 percent of GDP and 70 percent of exports. Other exports include sugar (to the European Union) and manufactured goods (to the CARICOM). Imports consist mainly of raw materials and intermediate and capital goods. Although both agriculture and tourism have considerable potential, together they account for less than 3 percent of GDP.