PORT OF SPAIN, Trinidad, The Central Bank of Trinidad and Tobago (CBB) Monday suggested that domestic economic activity was driven by growth in both the energy and non-energy sectors during the third quarter of 2022.
In addition, the CBTT, in its Monetary Policy Report for November, said that the reopening of the economy in late 2021 and the resumption of regular activities set the stage for the expansion of business output. Strong business lending and a recovery in consumer lending drove credit expansion, despite the slow growth in real estate mortgage lending, it added.
According to the CBTT, a revitalization of real economic activity on account of an expansion in energy and non-energy sector activity has become apparent.
It said domestic inflation accelerated, largely reflecting influences from the external environment and supply-side factors, which had notable pass-through to the domestic price environment, particularly food prices.
“On the upside, elevated energy prices continue to support higher Government revenue and export earnings. However, tightening international monetary policy resulted in widening interest rate differentials.”
The Central Bank said that recent economic developments and outlook strong growth in natural gas output drove the upward momentum in energy sector activity, while non-energy sector activity marginally improved.
Domestic economic activity continued its positive trajectory during the third quarter of 2022. Preliminary Central Bank estimates suggest a boost in real economic activity premised on expansion in both the energy sector activity of 6.9 percent and non-energy sector activity of 1.3 percent.
“Preliminary indicators of energy sector activity for the third quarter showed vast improvement driven by strong growth in natural gas production. Natural gas output jumped by 20 percent year-on-year on the heels of improved production from bpTT and Shell Trinidad and Tobago Limited (Shell).”
The CBTT said notably, at the end of March this year, Shell delivered the first gas from its Colibri project following the start-up of its Barracuda project in July 2021. Similarly, bpTT announced initial production from its Matapal project in September 2021.
“The improved natural gas output outweighed the decline in crude oil production of 4.3 percent and aided improved performance in the Mining and Quarrying sector of nine percent. The uptick in natural gas production also filtered through to the midstream resulting in higher LNG production (64 percent) over the third quarter and in turn facilitated strong growth in the Refining sub-sector of 41 percent). “
The CBTT said activity in the petrochemical sector declined (8.6 percent) as ammonia production fell by 9.2 percent, while methanol production improved marginally by 1.2 percent when compared to the same period a year earlier.
Non-energy sector activity continued to display positive trends in the third quarter of 2022, but momentum slowed in a few sub-sectors.
The Central Bank said the reopening of international borders and the uptick in air travel continued to propel activity in the transport and storage sector, which expanded by 34.9 percent year-on-year) during the quarter.
“Further, preliminary indicators also hinted at slower acceleration in the wholesale and retail trade excluding energy and manufacturing excluding refining and petrochemicals sectors. Meanwhile, the construction and financial and insurance activities sectors recorded declines during the third quarter by 6.1 percent and 3.7 percent, respectively.”
The CBTT said indicators such as local cement sales suggest that construction activity dipped following a strong rebound in the previous quarter stemming from a base effect due to pandemic-induced shutdowns in the second quarter of 2021.
It said though not as pronounced, the removal of COVID-19 restrictions also contributed to double-digit expansion rates in the agriculture sector, adding notable increases occurred in the production of perennial and non-perennial crops such as tomato cabbage, cucumber, and pumpkin.
In its report, the CBTT said that foreign currency credit maintained positive growth over the last eleven months.
It said that compared to a decline of 12.8 percent in September 2021, foreign currency credit expanded by 24.5 percent in September 2022. Commercial bank and nonbank foreign currency credit expanded – 24.4 percent and 27.2 percent year-on-year, respectively)- in September 2022.
“The nonbank sector recovery has not been as steady as commercial banks’ lending, with the subsector only recovering in the last four months, June 2022 to September 2022… Regarding foreign currency business loans, year-on-year growth was 22.2 percent in September 2022 compared to a 16.5 percent fall one year earlier.”
The CBTT said foreign currency deposits contracted in August and September 2022 – 4.2 percent and 5.5 percent, respectively, following 17 months of growth prior.
It said a falloff in business deposits contributed to the overall decline, despite consumer sector deposits growing by 1.5 percent.
“The accumulation of foreign currency by firms during the pandemic and subsequent usage to fund business activity as conditions improved appeared responsible for the decline in business foreign currency deposits.”
The CBTT said that the local market for foreign currency has benefitted from increased energy sector receipts in 2022.
It said purchases of foreign exchange by authorized dealers from the public amounted to US$4,749.4 million from January to November 2022, an increase of 39.1 percent relative to the same period a year earlier.
“Increased purchases followed a 45.3 percent increase in conversions by energy companies relative to the same period in 2021. For the months of January to November 2022, purchases from the energy sector accounted for 78 percent of total foreign currency purchases over US$20,000 in value.”
The Central bank said sales of foreign exchange by authorized dealers to the public reached US$5,973.5 million from January to November 2022, an increase of 34.2 percent relative to the same period a year prior.
“Based on reported data for transactions over US$20,000, credit cards (31.5 percent), retail and distribution (21.4 percent), energy companies (18.4 percent), and manufacturing firms (7.4 percent) made up the bulk of foreign exchange sales by authorized dealers to the public,” the CBTT added.
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