Central Bank predicts moderate expansion in economy

Central Bank (CBTT) is predicting economic activity in TT to expand moderately in the latter half of 2019 due to “fairly strong” natural gas outputs and improvements in the construction and finance sectors.The bank's projections were outlined in its Economic Bulletin July 2019 report.In its report, the CBTT said despite an uncertain international environment, “spill overs” from the energy sector, and accelerated execution of Government’s capital projects, can provide support for a modest revival of the non-energy sector. The report also said the price of oil trended higher, surpassing US $60 per barrel, over the past few months while local crude oil production stabilised at just over 59 thousand barrels per day.The price of natural gas remained relatively stable for the first six months of 2019 on the international markets, the bank's report said.

“Heading into the third quarter, preliminary data suggest that natural gas production has normalised and crude oil output remained steady,” the report added.

In the non-energy sector, preliminary data pointed to “improved performances in the distribution and finance sectors during the second quarter,” the bank said.Meanwhile, data from the Central Statistical Office showed that headline inflation remained well contained at 1.2 per cent in the twelve months prior to August 2019 with core inflation anchored at 1.0 per cent.However, higher vegetable prices (10.9 per cent) caused food prices to accelerate to 2.0 per cent – the highest rate of increase for 2019. “It is likely that severe flooding in September would lead to a further uptick in the price of some domestic produce,” the report noted.

The bank further noted that labour market conditions may be softening as data from the Ministry of Labour showed that 834 persons were retrenched over the first eight months of 2019. The report said retrenchments were concentrated in the construction, energy, finance and business services, and transport sectors. Also, figures showed that the average number of vacancies advertised in the print media for the period January to August 2019 also fell by 9.8 per cent, possibly “suggesting a decline in the demand for labour by businesses.”Meanwhile, TT’s gross official reserves amounted to $7,062.4 million, which was $512.6 million lower than the level recorded at the end of 2018. The level of reserves at the end of August 2019 represented 7.9 months of prospective imports of goods and services.

“At the end of August 2019, gross official reserves amounted to $7,062.4 million; $512.6 million lower than the level recorded at the end of 2018. This suggests that the external accounts registered an overall deficit in the first eight months of 2019.”“The level of reserves at the end of August 2019 represents 7.9 months of prospective imports of goods and services,” the report said.

The foreign exchange market also remained “remained tight” in the first eight months of 2019, notwithstanding higher foreign exchange sales to authorised dealers. “Over January to August, total purchases in the foreign exchange market increased by 8.1 per cent, mainly as a result of an 8.2 percent increase in conversions by energy companies.”“The significant share of sales to the energy sector corresponds with increased sales of foreign currency to a new fuel trading company following the closure of Trinidad and Tobago’s major crude oil refining company in late 2018.”The bank's Economic Bulletin also said increased sales to authorised dealers of US$1045.0 million was 2.5 per cent higher relative to the corresponding period of 2018.Meanwhile, the Monetary Policy Committee (MPC) noted that local indicators suggested that the economic recovery was not yet broad-based as inflation remained low, the demand for business credit was sluggish and external balance had not yet been restored. The next Monetary Policy announcement is scheduled for December 27.