Central Bank paints gloomy picture of Trinidad and Tobago’s economy

The Central Bank of Trinidad and Tobago (CBTT) says the coronavirus (COVID-19) has affected   all aspects of   the local economy this year, as it warned that the world economic performance will be severely impacted by the emergence of the virus.

In its July Economic Bulletin released here on Tuesday, the CBTT noted that the  International  Monetary  Fund  (IMF)  in  its  June  2020  World  Economic  Outlook  (WEO) Update is anticipating global growth to contract by  4.9  per  cent  in  2020.

Finance Minister Colm Imbert is due to deliver the 2020-21 national budget on October 5.

The CBTT said that in the Trinidad and Tobago situation, the energy  sector  is  expected  to  slow  as   global  economic   activity   and   international  travel  have  been     curtailed,     resulting     in  significant    contractions  in    demand    for    many  energy   products.

“The   non-energy  sector   will  also   continue   to   be   impacted  in   a   climate   of  uncertainty   as   to   the   course   of  the   disease  and  the  implementation  of  needed  measures.  Moreover, global supply disruptions will have knock-on effects on domestic manufacturing, and wholesale and retail trade.  Inflation is expected to stay subdued” the Central Bank noted.

It said that working conditions, including  shift  lengths  and  timing,  rostering  and  ‘work  from  home’ arrangements, have already adapted to the changed  circumstances  in  recent  months  and  will  continue to evolve.

“The room for additional fiscal accommodation will be fairly narrow in the current circumstances, while the prevailing high excess liquidity will influence the   timing   of   fresh   monetary   policy   actions”.

But the CBTT has noted that overall, the impact of the pandemic has heightened, indicating the   imperative  for  coordinated  fiscal,  monetary  and  structural  policies  for  assuring  macroeconomic  stability.

In its analysis, the CBTT noted that on  the  domestic  front,  activity  in  the  energy  sector  declined  in  the  second  quarter  of  2020.

It said broad  contractions  were  observed  in  this  sector,  including  natural  gas,  crude  oil,  liquefied  natural  gas  while  methanol  output  improved.

Outside  of  energy,  indicators  monitored  by  the  Central  Bank  suggest  that  activity  across  the  non-energy  sectors  was  uneven  and  somewhat  lethargic  in  the  first  quarter  of  2020.

It said the financial and insurance, and   real   estate   sectors   remained   resilient   and   activity   in   the   electricity   and   water, excluding gas, and manufacturing excluding refining and petrochemicals sectors increased.

At the same time the wholesale and retail trade, excluding energy, construction and transportation   and storage sectors posted declines.

“As in the rest of the world, the global pandemic has had a dampening effect on output  that  is  likely  to  persist  into  the  final  quarter  of 2020.COVID-19   has   also   impacted   Trinidad   and   Tobago’s  labour  market,  either  directly  or  via  the mitigation measures employed to restrict the virus.

“The  national  ‘Stay-at-Home’  public  health  measure  implemented  in  March  2020  contributed  to  labour  market  adjustments  such  as  furloughed  employment,  layoffs,  pay  cuts,  and  reductions  in  working hours.”

The CBTT noted that there was a sharp falloff in demand for labour, and job advertisements in the print media declined  by  43.4  per  cent  during  the  first  half  of  2020.

It said retrenchment  notices  filed  with  the  Ministry  of  Labour  and  Small  Enterprise  Development (MLSED) show that 363 persons were retrenched  during  the  first  half  of  2020,  with  the  majority  of  layoffs  occurring  in  the  manufacturing  industry.

The CBTT said domestic inflation remained low in the early months of 2020, partly reflecting slow consumer demand.  Headline inflation measured 0.4 per cent in March 2020, unchanged from January 2020.

The Central Bank said core inflation remained weak at 0.2 per cent due to slower price increases in the health sub-index, while an uptick in food inflation to 1.2 per cent was a result of higher prices for vegetables.

The Energy Commodity Prices Index (ECPI), which is  an  indicator  of  the  average  prices  of  Trinidad  and  Tobago’s  energy  exports,  declined  30.1  per  cent during the first eight months of 2020.

Following low energy demand and excess supply  at  the  close  of  2019,  international  crude  oil  prices  were  further  suppressed  by  geopolitical  tensions  and  adverse  demand  shocks  emanating from  the  COVID-19  pandemic.

The CBTT said that the benchmark  West  Texas  Intermediate  (WTI)  oil  price  fell  33.3  per cent to an average of US$38.05 per  barrel  over  the  first  eight  months  of  the  year.

Meanwhile, the  Henry  Hub  (HH)  natural  gas  price  declined by 29.1 per cent to average US$1.86 per million British Thermal Units (mmbtu) over the same period.

The CBTT said that the Central Government operations registered an overall deficit of TT$10.7 billion (One TT dollar=US$0.16cents) during the first nine months of the fiscal year 2019/20.

It said this was larger than the deficit of TT$4.8 billion recorded in the corresponding period one year  earlier  and  was  due  to  lower  revenues,  which  outpaced  the  decline  in  expenditure.

The Central Bank said that the deficit  was  financed  by  a  combination  of  external  and domestic borrowings and withdrawal from the Heritage  and  Stabilisation  Fund  (HSF).

“At  the  end  of  July  2020,  net  public  sector  debt  outstanding  increased to TT$120.5 billion (71.7 per cent of GDP) from TT$103.2  billion  (62.2  per  cent  of  GDP)  in  September  2019.  In  the  Mid-Year  Budget  Review  (June 2020), it was indicated that the fiscal accounts are anticipated to record a deficit of TT$14.5 billion in FY2019/20  compared  to  original  estimates  of  TT$5.3  billion.

“The  larger  deficit  is  attributable  to  a  falloff  in  revenue  caused  by  a  slump  in  energy  prices,  coupled  with  a  rise  in  expenditure  for  support  measures amid the COVID-19 pandemic.  Some of these  measures  included  salary  relief  and  income  supports   grants,   rent   relief   grants,   accelerated   income  tax  and  VAT  refunds,  and  additional  food  cards,” the CBTT said.

It noted that the Central  Government  issued  a  US$500  million bond on the international capital market in June  2020  for  budgetary  support  and  refinancing  purposes

It said multilateral support, such as the US$20.0 million loan facility approved by the World Bank in July 2020, was also tapped to address the fallout from COVID-19.


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