THE Central Bank of Trinidad and Tobago (CBTT) in its latest economic bulletin report for January 2021, identified that natural gas production declined by 23.6 per cent over the second half of 2020, while the preliminary estimates suggest that the construction sector increased by 12.4 per cent in the third quarter of 2020.
The bank said energy commodity prices were significantly impacted by the reduction in global economic activity, which was brought on by the Covid-19 pandemic and it was evidenced by a 14.8 per cent decline in the Central Bank Energy Commodity Price Index over the period July 2020 to January 2021.
“West Texas Intermediate (WTI) crude oil prices declined 23.9per cent year-on-year to an average of US$43.21, while natural gas prices fell 2.9 per cent to an average of US$2.28 per million British Thermal Units (mmbtu) over the seven-month period. More recently energy prices have rebounded, with WTI reaching over US$60 per barrel in early February 2021,” the report read.
It noted that the pandemic continued to have broad-based negative impacts on the performance of the domestic economy, particularly the energy sector.
As preliminary estimates showed that the Central Bank’s Quarterly Index of Real Economic Activity (2012=100) contracted by 8.7 per cent (year-on-year) during the third quarter of 2020, based on a relatively large drop in energy output.
On the labour market front, retrenchment notices filed with the Ministry of Labour revealed that 1,728 persons were retrenched during July to November 2020 while job advertisements in the print media declined by 37.8 per cent (year-on-year) during the latter half of 2020.
The Central Bank Economic Report stated that headline inflation moved from 0.4 per cent in July to 0.8 per cent in December, while food inflation accelerated from 2.3 per cent to 4.5 per cent and that the rise in food inflation appears to be related to pandemic-induced supply challenges.
On the fiscal accounts side the banks said a deficit of $1 billion was recorded for the first quarter of FY2020/21 (October-December 2020) compared with a deficit of $386.8 million in the corresponding period of the previous fiscal year.
It noted that the higher deficit was primarily on account of lower energy and non-energy receipts and aggregate expenditure also fell over the period, reflecting smaller outlays on all categories of recurrent and capital spending.
“At the end of December 2020, public sector debt outstanding reached $122.2 billion, which is 82.7 per cent of GDP compared to $121.3 billion at the end of September 2020.”
According to CBTT foreign currency loans fell off by 13.1 per cent in September 2020 compared to a growth of 2.6 per cent in December 2019 and loans by banks declined 11.9 per cent while non-bank financial institutions’ foreign currency loans fell by 16.8 per cent.
Foreign currency loans to businesses declined sharply, falling off by 13.3 per cent.
The business community has also been adversely affected by the pandemic as the closure of businesses and led to some downsizing, while contributing to the continued decline in business lending and business lending declined by 4.6 per cent in September 2020 compared with a 6.1 drop in June. The data suggest that businesses have been less inclined to seek new financing for their operations and data to September 2020 showed a decline in lending to the distribution and manufacturing sectors of 2.4 per cent and 4.6 per cent
And conversely, loans to the construction sector saw a 5.3 per cent increase during the period, in line with the increased activity reported in this sector in the third quarter of 2020.
The bank added that the short-term outlook for T&T will be dictated by the evolution of the pandemic and the public sector will continue to face the balancing act of maintaining much-needed support to the vulnerable, shoring up the health services and keeping up priority investments, while assuring that debt remains sustainable.
“This will require careful expenditure and financing choices aimed not only at macroeconomic stability, but also at facilitating business activity and strengthening the flexibility of the economy in the medium to long run,” the economic reported added.