Economic Development: The Macroeconomic Perspective

This chapter examines Trinidad and Tobago’s (TT) economic challenges stemming from commodity cycles and resource dependency. The country faced two commodity cycles leading to extended stagnation, exacerbated by pro-cyclical policies and slow reforms. TT’s growth is heavily reliant on global commodity price fluctuations, resulting in higher volatility compared to similar economies. Beyond volatility, prolonged economic contractions stem from declining productivity and competitiveness, and an undiversified economic structure. Labour productivity declines are most notable in the areas of public administration, trade, and transport. Total factor productivity, crucial for sustained growth, has declined post-2008. The data also shows symptoms of the Dutch disease such as an overvalued exchange rate, sluggish manufacturing growth, rapid service sector expansion, and declining contributions from agriculture and manufacturing to overall output. An unfavourable business conditions, limited access to finance, and workforce quality are found to further hinder economic growth.