PORT OF SPAIN — Trinidad and Tobago faces sluggish economic growth unless it overhauls longstanding policy weaknesses, according to the latest IMF Article IV consultation released before Carnival. The report forecasts GDP expansion of 0.8 percent in 2025, dipping to 0.7 percent in 2026, before rebounding to 2.5 percent in 2027 and 3.9 percent in 2028—driven largely by energy sector recovery.

Energy price crashes have repeatedly battered the economy here. Back in 1982, as the oil boom faded, then-Prime Minister George Chambers told citizens after Carnival, ‘Fete over, back to work.’ The call for higher productivity went unheeded. Energy prices plunged again in 2014, alongside falling natural gas output, sparking a depression that lasted until 2022. A post-COVID rebound and the Ukraine war finally lifted prices and delivered modest growth.

Finance Minister Davendranath Tancoo’s performance mirrors his predecessor’s, the IMF states. Core problems endure. The report repeats calls for better macroeconomic data—more accurate, timely and thorough—to support effective governance. Strong institutions demand quality information, it adds.

A flexible foreign exchange regime tops the list of fixes. Officials say the current policy mix clashes with the de facto fixed exchange rate, draining reserves amid chronic shortages. Fiscal deficits stoke demand for dollars. Narrowing interest rate gaps with the United States would attract capital and make local assets appealing, the report argues. Central Bank Governor Alvin Hilary floated a similar interest rate tweak last year.

Fiscal strains loom large. Accounting for public wage deals, new hires and projected energy prices, the IMF sees a 2026 deficit hitting 5 percent of GDP—over twice the budget projection. The financial sector stays stable and well-capitalized. Still, heavy government borrowing risks exposing banks to sovereign default, a point echoed by S&P Global Ratings. That agency shifted its view on local banking risks from stable to negative earlier this month.

Labor trends worsen the picture. A falling participation rate hampers productivity, competitiveness and tax revenue. The IMF demands action to reverse it.

Diversification away from energy dependence remains a perennial plea. The report praises the government’s ‘Revitalisation Blueprint’ and push for private investment. It welcomes steps against money laundering and terrorism financing, plus upgrades at the Ministry of Legal Affairs’ Companies Registry and National Insurance system. Interest in project proposals and oversubscription of a recent $1 billion U.S. dollar bond offer signal some momentum.

Those glimmers fall short. Without bold changes, reserves will keep eroding and growth will stall, officials warn. The economy performs no better or worse than before. Urgent reforms must realign conflicting policies for lasting stability.