PORT OF SPAIN, Trinidad, CMC – The Central Bank of Trinidad and Tobago (CBTT) says despite cautious optimism heading into 2024, heightened economic uncertainty still characterizes the global environment.
But it said the domestic economy, continued buoyancy in the non-energy sector is expected to drive overall economic activity in the short-term. In contrast, the energy sector is likely to remain subdued.
The CBTT, in its Economic Bulletin for January, said that in the non-energy sector, activity is anticipated to benefit from the continued strength in business operations and robust consumer demand.
“Meanwhile, in the energy sector, the recent start-up of some projects and others expected over the coming months can boost output. At the same time, the energy sector continues to face constrained gas supplies and the natural decline in production rates at mature hydrocarbon-producing wells in the short to medium run.”
The CBTT said that headline inflation is expected to remain low in 2024.
“Barring fresh external shocks, notably in energy markets and due to conflict-related shipping problems, imported inflation is anticipated to be fairly low. Weather conditions, possibly higher utility rates, increased cement prices, and the levy of property taxes could also lead to an uptick in domestic inflation.”
The Central Bank said that domestically, indicators suggest that activity in the non-energy sector was robust in the third quarter of 2023, while output in the energy sector was affected by a shutdown at a large facility during the period.
It said continued strength in business activity and increasing consumer demand supported the non-energy sector. Indicators monitored by the Central Bank suggest the momentum in the non-energy sector was led by the wholesale and retail trade (excluding energy), transportation and storage, and construction sectors.
A temporary shutdown at a large upstream facility contributed to notable crude oil and natural gas output declines. Other energy commodities registering reductions in output were liquefied natural gas (LNG), ammonia, and methanol,” the CBTT said.
It said domestic inflation slowed significantly during the second half of 2023, while labor market conditions improved in the third quarter. Headline inflation measured 0.7 percent (year-on-year) in December 2023, according to the Central Statistical Office (CSO) data. This represented a decline from 4.7 percent in July 2023. Retreating inflationary conditions were evident in food and core inflation over the six months.
Data from the CSO indicated that the unemployment rate declined to 3.2 percent in the third quarter of 2023 from 5.4 percent in the corresponding quarter of 2022.
Further, supplementary indicators monitored by the CBTT also suggest more favorable labor market conditions in the year’s second half. Data from the Ministry of Labour indicated that 101 persons were retrenched from July to October 2023 compared to 511 persons during the corresponding period in 2022.
The Central Government fiscal accounts recorded a deficit of TT$173.4 million (One TT dollar=US$0.16 cents) in the first month of the fiscal year (FY) 2023/24 compared to a surplus of TT$328.7 million in October 2022.
Central Government revenue declined by TT$146.7 million to TT$3.2 billion in October 2023 due to energy and capital revenue declines.
Meanwhile, overall expenditure increased by $355.3 million, the bulk of which came in the form of interest payments and transfers and subsidies. Adjusted General Government debt outstanding, which excludes debt issued for sterilization purposes, increased to TT$137.6 billion in December 2023 from $137.2 billion recorded at the end of September 2023.
The Central Bank said that monetary policy 2023 remained geared toward managing inflation while supporting the economic recovery.
The Central Bank maintained the Repo rate at 3.50 percent in September and December 2023. Excess liquidity – commercial banks’ deposits at the Central Bank more than their reserve requirements – rose to a daily average of TT$5.5 billion over July to December 2023 from TT$5.1 billion over the same period in 2022.
“There was some volatility towards the end of the year as government financing activity increased, causing a sharp pick-up in interbank activity and access to the repo window on one occasion.
“Commercial banks’ weighted average lending rate declined in 2023, leading to an associated decline in the interest rate spread. Short-term interest rates have narrowed given heightened government activity on the domestic capital market, which has contributed to a slight upward shift in shorter-term domestic rates.”
The CBTT said private sector credit continued to strengthen in 2023, characterized by a ramping up of consumer credit alongside continued buoyancy in business credit. Meanwhile, the local market for foreign currency remained tight in 2023, with lower-than-usual energy sector conversions.
It said Trinidad and Tobago’s gross official reserves amounted to US$6,257.9 million at the end of 2023, US$574.5 million lower when compared to the end of 2022. As of the end of December 2023, gross official reserves represent 7.8 months of prospective imports of goods and services.
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