Recession clouds dampen Carnival spirit in oil-reliant Trinidad

By Jonathan Spicer

SPEYSIDE, Trinidad & Tobago (Reuters) - Plunging oil prices are darkening Trinidad and Tobago's Carnival party, which is ramping up as the Caribbean nation slumps deeper into the sort of unpredictable recession that is gripping energy-reliant countries globally.

Trinidad and Tobago's gross domestic product contracted in 2015, and is forecast to shrink further this year - and possibly even next - without a rebound in crude oil prices and changes to wean the economy off oil and gas production.

Like neighboring energy powerhouse Venezuela, Trinidad and Tobago - the Caribbean's top exporter - has benefited from oil and gas reserves that boosted revenues and spending five years running.

Energy accounts for about 40 percent of the economy here, but with crude now trading at just over $30 a barrel, the twin-island country of 1.4 million faces the job losses and tough choices that emerging markets of all sizes face over reforming an economy heavily reliant on volatile global markets.

Cases of the Zika virus in nearby Venezuela and Barbados may also crimp travel to Trinidad and Tobago, though it poses less economic pain than to more tourism-reliant neighbors.

The recession that began early last year has some anxious Trinidadians skipping Carnival season parties, while many of the feathered and sequined costumes that are usually sold out by New Year's were still available in Port of Spain shops in January.

"A month before Carnival, that is unheard of," said Marla Dukharan, group economist at RBC Caribbean.

In October, the newly-elected government said manufacturing and the paltry agriculture and tourism sectors were part of an "urgent priority" to diversify the $29 billion economy and offset "uncertainties facing our energy sector."

OUTLOOK GRIM

But economists are skeptical of a quick restructuring since little happened after energy meltdowns in 1986 and 2008. Many expect a 1 to 2 percent slump this year after the economy shrank by about 2 percent in 2015.

Any growth next year will likely depend on oil.

"We are blessed with collective Alzheimer's in Trinidad and Tobago," said Dukharan, who predicted five years of crisis would be needed to bring necessary structural changes.

Down 70 percent since mid-2014, oil is not expected to rebound until later this year or early next. The rout has sent larger producers such as Nigeria and Azerbaijan into loan discussions with the World Bank.

Trinidad and Tobago's energy-related revenues fell by more than half last year, prompting promises of more production and exploration. But job losses are growing.

Leslie James, 39, has done more work scuba diving with Tobago tourists since October when his employer, U.S.-based Tidewater, trimmed operations supplying food and generators to oil rigs off Trinidad's coast.

"With oil prices down, they can't afford the boats," he said of energy companies. "I don't know when I'll be going back out to the rigs."

(Reporting by Jonathan Spicer; editing by Frank Jack Daniel, Simon Gardner and G Crosse)

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