Central Bank: Covid19 vaccinations key to growth in Trinidad and Tobago, region

THE Central Bank on Friday expressed confidence that the implementation of covid19 vaccination programmes throughout Caricom, including Trinidad and Tobago, " is expected to have a strong influence on growth rates in individual territories."

The bank made this observation in its latest monetary policy announcement. The bank also observed that the global economy is on a recovery path this year as the deep shocks caused by the pandemic gradually subside.

As it announced it had maintained the repo rate at 3.5 0 per cent, the bank said, "In emerging markets, a few monetary authorities raised their policy rates in March 2021 amidst concerns about looming inflation." Domestically, the bank continued, "Economic conditions are yet to fully stabilise from the covid19 shock. During the fourth quarter of 2020, the energy sector experienced significant year-on-year production falloffs for natural gas, liquefied natural gas and petrochemicals."

In the non-energy sector, the bank said its indicators suggest that activity there "is slowly recovering, fueled by the construction and finance and insurance sectors."

Headline inflation remained contained at 0.8 per cent (year-on-year) in February, with food inflation decelerating to 2.3 per cent after surging to 5.1 per cent last November."

But the bank cautioned, "The recent increase in animal feed costs and unseasonal weather patterns may provide some upward impetus for prices in the coming months."

The bank said the level of official international reserves slipped from US$6.95 billion at the end of 2020 to US$6.66 billion in mid-March (about eight months of import cover). The bank explained that its monetary policy actions which began last March "have had a year to work their way through the financial system."

While liquidity remains high, the bank said it has come down to a daily average of around $8 billion in March, from record high levels of close to $15 billion in late 2020, mainly on account of government borrowing operations.

The bank said interest rates have continued to decline, with the commercial banks’ weighted average lending rate falling to 7.29 per cent by last December. "Lower interest rates and ample liquidity have not elicited a very strong private sector credit response." The bank said credit granted by the consolidated banking system declined by 0.9 per cent (year-on-year) last December, with business and consumer credit contracting by 4.7 per cent and 2.1 per cent, respectively. But the bank added there was increased loan activity in construction, food, drink and tobacco manufacturing, in the area of business credit.

The bank observed, "Many individuals and businesses seem reluctant to increase their debt commitments in an economic climate still marked by uncertainty." On the supply side, the bank said commercial banks "remain cautious in assessing clients’ repayment capacity." The bank concluded that the deep declines experienced by the domestic energy sector last year are not expected to continue in 2021 and the non-energy sector "appears to be in an early phase of correction."