Central Bank: Covid, energy shaping economy

THE Central Bank has said Trinidad and Tobago's economy was shaped in the first half of this year through a combination of developments in the international energy industry and covid19 pandemic-induced reactions by the public and private sectors.

In its monetary policy announcement (MPA) released on Friday, the bank said the energy sector's performance was mixed.

"While output of several products dipped, prices of some key energy exports were strong."

The bank said available data showed that for the first four months of this year, compared to the same period in 2020, natural gas output was 20.6 per cent lower, while crude oil production rose marginally by 0.6 per cent.

The bank said there there was some decline in the production of liquefied natural gas, natural gas liquids, ammonia and methanol.

"Meanwhile, international energy prices have been trending upwards."

The bank said as at June 21, West Texas Intermediate (WTI) crude oil and Henry Hub natural gas prices rose to average US$73.66 per barrel and US$3.15 per mmbtu respectively.

On non-energy activities, the bank said, "The initial resurgence in construction and manufacturing observed at the start of the year was impeded in the context of stringent national lockdown measures employed in the second quarter to curtail the spread of the virus."

In the short term, the bank continued, these measures will affect the provision of a wide range of goods and services as well as personal and business incomes.

In this environment, the bank said headline inflation remained contained at 1.1 per cent in April 2021, according to the most recent data from the Central Statistical Office. The bank said from January to mid-June, excess liquidity declined from $10.8 billion to $7.9 billion.

The bank attributed this partly to domestic financing activities of the Government. The bank said private-sector credit remained sluggish, with bank credit to businesses declining by 3.2 per cent between last March and March 2021.

The bank also said global economic recovery is under way, with the International Monetary Fund (IMF) forecasting a global expansion of six per cent this year. It said this is due in large measure to expanded covid19 coverage in advanced and some emerging market economies.

But the bank said, "The prospects are quite uneven, based on the difficulty of access to vaccines faced by many low and middle-income countries, coupled with the growing threats posed by new variants of the virus."

The bank said substantial fiscal support by governments across the world continues, alongside medium-term plans for gradual exits from such support.

"Broad monetary accommodation to underwrite economic recoveries has also been maintained." The bank observed that some central banks in other countries have started to, or signalled the intention to, raise interest rates to stave off looming inflation.

As it promised to continue to carefully monitor and analyse international and domestic developments and prospects, the bank said it will maintain the repo rate at 3.5 per cent.

The next MPA will be issued on September 30.