Jan 2006 Financial News

Central Bank: Strong TT economy in 2006

Jan 11, 2006

THE NATIONAL ECONOMY is expected to remain very strong in 2006 despite concerns about high levels of inflation and the possible impact of inflation on wage settlements. In its analysis of TT’s 2006 economic prospects, the Central Bank said it projected real Gross Domestic Product (GDP) growth of just over ten percent this year “mainly on the strength of the energy sector.” The Bank said the major impetus for economic growth will come from the first full year of Atlantic LNG’s (ALNG) Train IV and increased ammonia and methanol production. In a December 16, 2005 statement in the House of Representatives, former energy minister Eric Williams said Train IV will bring direct revenues to TT of US$5.311 billion over a 20-year life cycle.

The Bank said ongoing expansion in the public sector construction activity “will be the major catalyst for continued strong non-energy growth” in 2006. The Bank also said the outlook for international oil prices suggests a continued strong foreign reserves position for TT “which argues against any major weakening in the exchange rate.” It also remains committed to increasing foreign exchange sales to the commercial banks within a framework of greater flexibility. The Bank said demand-driven inflationary pressures are likely to persist in 2006 given a projected expansion in the non-energy fiscal deficit and income tax relief.

In light of these circumstances, the Bank said it will retain its restrictive bias through higher interest rates and measures to absorb excess liquidity. The Central Bank said it will continue to target an inflation rate of no more than five percent and re-visit the inflation target in mid-2006, based on the trend in food prices. The Bank added that the effect of supply conditions on food prices will be a major factor in the evolution of headline inflation. The Central Bank also said it expects global economic growth in 2006 to remain strong despite high oil prices, led by continued buoyancy in the US, and China, and a pick-up in activity in Europe. The Bank added that interest rates in the US are expected to keep rising through the end of the first quarter of 2006.

Clint Chan Tack
Newsday
Wednesday, 11th January, 2006.
http://www.newsday.co.tt/morenews.php?p=1#32383