PORT OF SPAIN, Trinidad– The Central Bank of Trinidad and Tobago (CBTT) says the country’s short-term outlook is expected to improve in 2022.
“Growth in the domestic economy is projected to strengthen, driven by expansions in the energy sector. Activity in the non-energy sector is also expected to improve following the gradual re-opening of the economy since the third quarter of 2021 and the broad-based rollback of restrictive measures at the end of the first quarter of 2022,” the CBTT said in its “Annual Economic Survey 2021” released here on Wednesday.
The Central bank said despite improving domestic economic activity, labor market conditions might remain constrained until virus caseloads are effectively contained, and vaccination rates increase among the working-age population.
In this context, low aggregate demand and spare capacity may attenuate upward pressure on local prices.
“Even so, rising inflation and inflationary expectations from key source markets and transitory supply chain disruptions for tradable goods will add some upward impetus to prices. On account of increasing revenue collections, and in line with the Government’s medium-term objective to achieve a primary surplus, the fiscal deficit is anticipated to narrow.”
However, the CBTT said this outturn might be tempered by the Government’s commitment to fund COVID-19-related expenditures.
“In this environment, prudent management of debt levels will be necessary to safeguard debt sustainability. Meanwhile, the external accounts are also expected to benefit from the impulse generated by the ascent in international energy prices and increased external demand for non-energy products.
“As a result, despite some anticipated tightness in the foreign exchange market, Trinidad and Tobago’s stock of international reserves is expected to remain resilient against external vulnerabilities.”
But the CBTT said that risks to this outlook are skewed to the downside. These include a flare-up in virus caseloads requiring hospitalization, which elicits a fresh round of containment measures that hamper business activity, curtail employment and place further strains on available fiscal resources.
The industrial relations climate is also anticipated to be tenser in 2022 due to a rise in the cost of living.
“Developments on the international front will shape the trajectory of global interest rates, external supply pressures, and demand from CARICOM and elsewhere for Trinidad and Tobago’s products.
“Overall, continued efforts will need to be made to further structural reforms to promote domestic competitiveness in a more challenging global setting.”
The CBTT said domestic economic activity mainly remained constrained in 2021, though there were evident signs of improvement.
According to data from the Central Statistical Office (CSO), Gross Domestic Product (GDP) at constant prices -real GDP – grew by 0.9 percent during the first three quarters of 2021 compared to the same period a year ago.
It said disaggregation of the data revealed that the growth momentum came from the non-energy sector while the energy sector waned. The non-energy sector grew by 3.6 percent during the first three quarters of the year compared to a 4.4 percent decline in the energy sector over the same period.
In the non-energy sector, growth came from several sub-sectors, including construction, trade, and repairs, excluding energy and manufacturing, refining, and petrochemical, while energy sector output was pulled down by declines in the natural gas exploration and extraction and the
Refining, including LNG sub-sectors.
CBTT said that preliminary data for the fourth quarter of 2021 from its Quarterly Index of Economic Activity (QIEA) suggest that energy sector activity experienced moderate improvements. During the fourth quarter of 2021, growth was observed in crude oil production (8.8 percent), natural gas production (0.9 percent), NGL production (11.4 percent), and methanol production (24.7 percent) as well as ammonia production (2.4 percent).
Crude oil production continues to be buoyed by BHP’s Ruby Development, which came stream in May 2021. The improvement in natural gas production was due to the start-up of bpTT’s Matapal project in September 2021.
The Central bank said that the significant gains noted in methanol production were partially due to a base effect. The Atlas methanol facility underwent a six-week planned maintenance program in the fourth quarter of 2020.
In addition, production from the new Caribbean Gas Chemical Limited (CGCL) facility, which began in December 2020, continued to bolster methanol output in 2021.
CBTT said both LNG and urea production remained depressed during the three months, decreasing by 5.1 percent and 0.5 percent.
In the non-energy sector, preliminary indicators for the fourth quarter point to continued recovery
in some areas, but evidence of sustained recovery is not yet apparent, the CBTT said.
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