Central Bank: Uneven distribution of covid19 vaccines hampers economic recovery

The Central Bank has said an uneven distribution of covid19 vaccines distribution can pose serious threats to emerging markets and developing countries' economic recovery.

In its Monetary Policy Report May 2021, it said the International Monetary Fund (IMF) has projected global expansion to six per cent for this year, after a contraction of 3.3 per cent in 2020, but threats of new virus variants, diverse fiscal support and varied access to vaccines could imply uneven recovery paths.

“In the Caribbean, most countries have experienced sharp declines in economic activity alongside rising unemployment and business closures amidst the ongoing pandemic.

“Commodity producers are expected to benefit from the uptick in energy prices, but subdued growth is anticipated for tourism-dependent economies given continued soft demand for travel and tourism-related services.”

It added headline inflation was expected to remain contained in the short to medium term, but this was dependent on the pace of global recovery of the covid19 pandemic.

Vaccination programmes and gradual relaxation of restrictions on movement were expected to support a significant pickup in global growth in the second half of 2021 and into 2022, the Central Bank said.

The bank's report comes as mass vaccinations ramp up in Trinidad and Tobago after the country received 800,000 Sinopharm vaccines on Wednesday. The economy is also gradually reopening with the food sector joining the construction and manufacturing sectors from Monday.

The bank also forecast an uptick in energy prices, where oil as averaged US$70 a barrel and natural gas US$3 mmbtu in recent weeks.

“Energy commodity prices are expected to improve in the short to medium term, driven by rising global demand. Local energy production should receive support from rising commodity prices and increased demand for energy-related products as some economies gradually reopen," the bank said.

“The extent of local covid19 containment measures alongside the planned acceleration of vaccinations will affect how fast domestic output recovers in the second half of this year.”

The Central Bank also said core inflation should remain low and stable because of small amounts of upward pressure on demand because of the continued limits on economic activity and ample spare production capacity.

“Headline inflation averaged 0.9 per cent over October 2020 to April 2021. On a year-on-year basis to April 2021, both core and headline inflation measured 1.1 per cent. Food inflation slowed over the period, decelerating from 4.4 per cent in October 2020 to 1.5 per cent in April 2021.

“Despite an acceleration in international food prices, domestic food price inflation averaged 3.3 per cent over the period, slowing to 1.5 per cent in April 2021 from 4.4 per cent in October 2020.”

The Central Bank added that the repo rate would be maintained at 3.5 per cent, as it continued to monitor and analyse international and domestic developments and prospects. The report has been issued after the previous monetary announcement on the repo rate in June.