S&P takes T&T off negative rating, but 6% GDP loss still possible

Standard & Poor has taken Trinidad and Tobago off its negative credit watch, citing limited debt pressures from a recent bailout of the country's biggest investment holding company, CL Financial.

The international bond rating agency assigned the country a stable outlook after evaluating the February bailout of CL, which had suffered huge losses and could not borrow enough money on credit markets paralyzed by the global financial crisis.

The move means Trinidad and Tobago can sell bonds on the international financial market and allow it to secure short-term loans.

Credit analyst Roberto Sifon-Arevalo told international business reporters said there could still be a potential gross loss of about $1.4 billion from the CL bailout, which is about 6 per cent of expected 2009 gross domestic product (GDP).

But he said Trinidad and Tobago's solid fiscal profile, which resulted from years of high-energy prices, gives the government the flexibility needed to manage the debt burden and the ongoing global financial crisis without "materially weakening public finances."

Finance Minister Karen Nunez-Teshiera told Parliament last week she expects a 2 per cent growth in GDP in the coming year, a big improvement over the 0.9 per cent shrinkage over the past year.

"This is not the Government saying this...This is Standard and Poor's taking us off the negative watch and saying to the people of Trinidad and Tobago that how this Government has managed its business, even in the light of the CL financial issue, that they obviously have a lot of confidence in our macroeconomic fundamentals," she said.

Standard and Poor's placed its ratings on Trinidad and Tobago on credit watch with negative implications on February 3rd, following the government's announcement a few days earlier on January 30th that it would assume control of or provide support to several key subsidiaries of the CL Financial Group.