Trinidad and Tobago - Overview of economy

In regional terms, Trinidad and Tobago is an economic powerhouse, endowed with extensive reserves of oil and natural gas and possessing a diversified range of manufacturing industries. Unlike other Caribbean nations, its dependence on tourism and agriculture is very limited, and tourism in Trinidad is not yet fully developed. Tobago, with much less heavy industry, is a much smaller, quieter island where tourism is an important source of employment and foreign exchange.

Trinidad's economic fortunes changed dramatically at the beginning of the 20th century when commercial petroleum extraction began. Previously, the island had been mainly a sugar producer, with large plantations established on the fertile central plains. Oil rapidly replaced

agriculture and by the 1950s represented almost 30 percent of gross domestic product (GDP). Since then, Trinidad and Tobago's economy has reflected the ups and downs of the world oil industry. During the 1970s, the country experienced a spectacular boom as international oil prices soared. During that time, the government was able to invest some of this income in infrastructure and state-controlled industries, especially gas production. From 1982 on, however, oil prices fell and Trinidad and Tobago underwent a long and painful recession , with the economy shrinking at an average annual rate of 6 percent between 1982 and 1987. Unemployment, poverty, and emigration all increased.

Since the early 1990s, the economy has recovered to a large extent, and oil and gas production income has generated steady growth, averaging 4 percent annually between 1994 and 1999. The economy grew strongly in 1999, by 6.9 percent, because of an oil price increase. Thanks to the oil boom of the 1970s, Trinidad is also a major exporter of petroleum byproducts such as methanol and ammonia. There is also a significant steel industry, powered by cheap natural gas, as well as a manufacturing sector that produces food, beverages, and cement for local and regional markets.

Agriculture has been neglected since the 1970s, and the main crop remains sugar, most of which is exported to the European Union (EU). Other crops are cocoa and citrus, but these are not grown on a large scale. Tourism is also less important in Trinidad than in most other Caribbean islands, although in the 1990s the government made efforts to attract a larger number of visitors. Tobago is the main tourist destination, with more than half of the country's hotel rooms.

Although Trinidad and Tobago remains vulnerable to fluctuations in world oil prices, it has developed other areas of its economy to balance its economic risks. It has also attracted a cross-section of foreign companies, principally involved in oil and gas production, while retaining a strong element of state control. Poverty remains a serious problem despite oil-related income. The World Bank estimated in 2001 that 21 percent of the population lives in poverty and 17 percent are unemployed.

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