Trinidad and Tobago
This article was added by the user . TheWorldNews is not responsible for the content of the platform.

Central Bank: Favourable outlook for economy, barring unforeseen shocks

Sean Douglas Atlantic LNG, Point Fortin. File photo
Atlantic LNG, Point Fortin. File photo

THE Central Bank has a generally favourable outlook for the TT economy this year, barring any unforeseen external major shocks, it said in its Monetary Policy Announcement for March issued on Friday, in which it maintained its repo rate.

Yet amid a good post-covid19 global recovery, the report highlighted significant falls in global energy prices over three months, surely of relevance to energy-reliant TT.

"Energy prices have already demonstrated some softening. West Texas Intermediate (WTI) crude oil prices moved from an average of US$76.52 in December 2022 to US$67.64 per barrel at mid-March 2023.

"Natural gas prices (Henry Hub) fell from US$5.50 per mmbtu to US$2.24 per mmbtu over this period."

However, on Friday the website listed the WTI price at a healthy US$75.37 and the natural gas price at a modest US$2.184.

The report said, "The global economy is rebounding faster than earlier anticipated from the covid19 pandemic," while musing inflation, geopolitical tensions, and financial stability concerns amid the failure of a few banks in the US but without any resulting contagion.

The Central Bank gave some positive news on inflation, economic activity, employment and business confidence in TT.

"Domestic inflation moderated in January. According to the Central Statistical Office, headline inflation decelerated to 8.3 per cent in January 2023 (year-on-year) compared with 8.7 per cent a month earlier." Food inflation remained at 17.3 per cent, with smaller hikes for fish, breads and cereals.

Food inflation remained at 17.3 per cent, with smaller hikes for fish, breads and cereals, up to March 2023, the Central Bank reports. -

Core inflation (excluding food) fell from 6.7 to 6.1 per cent, as price increases eased for housing, communication, furnishings and building materials.

The latest estimates of growth in 2022 at 2.5 per cent reflected a relatively favourable performance in the energy sector and a gradual revival in non-energy production. "There is some early evidence of improving labour market conditions based on observed increases in labour force participation in the third quarter of 2022 and the decline in the number of persons retrenched during the second half of 2022.

"The outlook for 2023 looks favourable, barring major external shocks."

The report suggested a renewed business confidence in TT.

"Financial system lending to businesses expanded by 9.8 per cent in December 2022 (year-on-year).

"Credit growth to the construction and manufacturing sectors (18 and 11 per cent respectively) were particularly robust, while consumer credit gathered momentum."

The report said private banks’ excess reserves at the Central Bank fell by about $400 million, from $6.7 billion in late December 2022 to $6.2 billion in late March 2023.

This was largely due to more extensive open market operations — net treasury bill sales of around $1 billion — plus US$300 million in foreign exchange interventions by the Central Bank.

The bank considered domestic inflation, business confidence and liquidity in deciding upon setting its repo rate, the interest rate it charges private banks to lend money overnight.

"While domestic inflation had shown signs of slowing down, the MPC (Monetary Policy Committee) acknowledged that unanticipated external impulses and second round effects of the adjustment to local fuel prices could temper further reductions in inflation in the short run.

"The current buoyancy in credit was welcome in fostering growth that was still at an early stage, but needed to be closely monitored given the implications for demand pressures and the quality of bank assets. The MPC also noted the impact that the Bank’s recent open market operations had been having on financial system liquidity. "Taking all these factors into account, the MPC agreed to maintain the repo rate at 3.50 per cent."

Vowing to continue to monitor global and domestic developments and prospects, the Central Bank promised its next monetary policy announcement on June 30.