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    October 23

  • 09:47 PM

Central Bank comments on state of Trinidad and Tobago economy

CMC,

Added 30 September 2018

cbtt

PORT OF SPAIN – The Central Bank of Trinidad and Tobago (CBTT) says activity in the energy sector continued to pick up in the second quarter of this year and that natural gas production benefitted from the implementation of the Juniper project with positive spillovers to methanol output.

In its latest monetary policy statement released here on the eve of the presentation of the 2018-19 national budget, the CBTT said that recent data show a reversal of the trend of falling cement sales, noting however “it is too early to tell whether this represents the start of a recovery in construction and in the non-energy sector as a whole”.

It said that price pressures stayed well contained, with headline inflation registering 1.1 per cent in August 2018.

The CBTT said that lending to the private sector continued to grow in 2018, reaching 7.1 per cent in July.

“However, this reflected mainly loans for refinancing and debt consolidation, with credit to businesses rising by a more modest 2.7 per cent,” it said, noting that over the first half of the year there was a 1.2 per cent decline in the interest spread of commercial banks, the result of a simultaneous decrease in the average lending rate alongside a rise in the average deposit rate.

The Central Bank said that in the third quarter, some banks announced increases in their prime lending rates as well as higher term deposit rates.

“There was nonetheless a widening of the negative differential between Trinidad and Tobago and US three-month treasury yields over the third quarter from -83 to -86 basis points, the result of faster increases in US yields on these instruments.”

The CBTT said there had also been a temporary spike in excess reserves of commercial banks in the

July-August period in the context of widespread investor interest in a public sector bond arrangement.

“The Central Bank’s removal of the 2 per cent secondary reserve requirement on banks’ deposit liabilities in August also boosted liquidity. This action was in keeping with the Bank’s objective to progressively rely on more market-based policy measures, including open market operations.”

The CBTT said that rising trade tensions threaten the medium-term growth outlook, and the resumption of interest rate rises in the United States and the prospect for further increases will affect international financial markets in coming months.

It said that although the International Monetary Fund (IMF) in its July 2018 update maintained its global growth projections at 3.9 per cent for 2018 and 2019, “the escalating tariff war between the US and China, and uncertainty around Brexit heighten downside risks to the forecast.

“Moreover, following a mid-year pause the US Federal Reserve raised its benchmark rate to between 2.00-2.25 per cent on September 26, this year.” (CMC)

 

 

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