PORT OF SPAIN, Trinidad (CMC) — The Central Bank of Trinidad and Tobago
(CBTT) says the local economy will benefit this year from the
coming on stream of new gas production even as it warned that the economic
conditions in oil rich the twin-island will continue to face significant challenges.
“Specifically, production from bpTT’s Juniper platform is likely to begin
in the third quarter of 2017, which should boost natural gas supplies and
the energy sector on the whole.In Trinidad and Tobago, production indicators
of real economic activity monitored by the Central Bank suggest weaker
performances in both the energy and non-energy sectors in the latter half of 2016.
In the fourth quarter of 2016 the energy sector showed year-on-year
declines in the production of crude oil (4.2 per cent) and natural gas (10.8 per cent)
“These declines by upstream producers were largely attributed to preparatory
work to facilitate the inclusion of new fields by major oil and gas producers and
increased maintenance activity. At the downstream end, petrochemical
producers were negatively impacted by reduced oil and gas supplies which
resulted in lower LNG, fertilizer and methanol production.”
“While international oil and gas prices are expected to rise in the wake of the
December 2016 agreement by OPEC members to cut production, price
increases could be muted by higher shale oil output in the US,” the CBTT said in
its March Economic Bulletin.
It said that the revival of the non-energy sector, especially construction and
distribution activity, could be helped by faster execution of government’s capital
“Overall, economic conditions are likely to remain challenging in 2017 as the
economy continues to face reduced export earnings, constrained fiscal
accounts and rising unemployment,” the CBTT added.
The bank said that over the first half of 2016, the external accounts of Trinidad
and Tobago registered a deficit of TT$367.3 million (One TT dollar =US$0.16
cents) with gross official reserves amounting to US$9,565.7 million at the end of
The current account showed a deficit of US$582.7 million, which was primarily
driven by depressed conditions within the energy sector.
The CBTT said that a decline in exports coupled with a marginal increase in
imports led to a deficit of US$114.4 million on the Goods sub-account. Energy
sector exports are estimated to have fallen by US$1,340.8 million during the first
six months of 2016 to US$3,361.2 million as a result of lower energy prices and
At the same time energy imports climbed by 37.1 per cent to an estimated
US$1,556.8 million reflecting an increase in the volume of petroleum imports
over the period.
But the bank noted that with falling inflows from the energy sector, conditions
within the domestic foreign exchange market remained tight during the first six
months of 2016 and that in order to support the market, it sold US$706.6 million
to authorized dealers in the first six months of 2016.
The financial account registered a net inflow of US$573 million, which was a
reversal of the net outflow of US$429 million in the similar period in 2015. This
was mainly due to net inflows of portfolio investment which occurred primarily as
a result of residents reducing their holdings of foreign assets.
“The change in the gross official reserves for the second half of 2016 suggest a
deficit of US$99.9 million on the external accounts, bringing the level of gross
official reserves at the end of December 2016 to US$9,465.8 million, equivalent
to 10.5 months of imports,” the CBTT said.
The CBTT said that in the context of lower energy revenue, the Central
Government’s fiscal position worsened.
It said the latest revised estimates from the Ministry of Finance show an overall
deficit of TT$7.3 billion or five per cent of gross domestic product (GDP) on the
fiscal accounts for fiscal year 2015/16, October 2015- September 2016,
compared with an initially budgeted deficit of TT$2.8 billion and the deficit
outturn for the previous fiscal year of TT$2.7 billion or 1.8 per cent of GDP.
“Provisional data provided by the Ministry of Finance suggest that the central
government recorded a deficit of TT$2.5 billion for the first quarter of
FY2016/17. This was financed through domestic borrowing comprising of
Government draw-downs on the overdraft facility with the Central Bank and the
issuance of a one billion TT dollar domestic bond in December 2016.
“Notwithstanding new borrowing by the Central Government, the public sector
debt outstanding declined to TT$87.4 billion (56.6 per cent of GDP) at the end
of December 2016 from $88.3 billion (60 per cent of GDP) at the end of
September 2016 owing to repayments on contingent debt.”
The CBTT said that amidst weak domestic economic conditions, it held its key
policy interest or repo rate unchanged at 4.75 per cent since January 2016.
It said lending by the consolidated financial system slowed to 3.8 per cent in
November 2016 as business credit, consumer credit and real estate mortgage
lending softened. Meanwhile, the Central Bank adopted a tighter liquidity
management approach in the latter half of 2016, withdrawing TT$1.2 billion from
the financial system via open market operations.
The CBTT said petrochemical output contracted by 12.9 per cent while refining
output fell by 8.5 per cent. For the second half of 2016, oil and natural gas
production were lower by 7.7 per cent and 15.4 per cent, respectively. Available
data suggest that non-energy output may not have been strong in the third
quarter of 2016.
The CBTT said construction activity appears to have been subdued as
indicated by large declines in local sales of cement and retail sales of hardware
and construction materials. The decline in the Index of Retail sales for the third
quarter of 2016 also points to marked contractions in distribution activity.
However, there was growth in the finance, insurance and real estate sector on
account of increased commercial banking activity.
The bank said that the labour market continued to slacken in the first half of
2016. The unemployment rate increased to 4.4 per cent in the second quarter
of 2016 from 3.2 per cent in the corresponding quarter of 2015.
“While the number of persons with jobs fell by 16,200 persons, a significant
decline in the labour force of 8,200 persons resulted in the number of persons
classified as unemployed rising by just 8,000 persons over the twelve months to
June 2016,” the CBTT said.