Sep 2016 Financial News

Central Bank bulletin: T&T economy contracts 5.2%

Sep 19, 2016

The Central Bank yesterday estimated that the T&T economy contracted by 5.2 per cent in the first quarter of 2016, compared with the same quarter in 2015, as a result of a 9.1 per cent decline in the energy sector and a 2.8 per cent decline in the non-energy sector, according to the July 2016 Economic Bulletin, which was released yesterday.

The information on the performance of domestic economic activity comes two weeks before the presentation of the 2017 Budget by Finance Minister Colm Imbert and is based on the Central Bank’s Index of the Quarterly Gross Domestic Product (GDP), which is based on indicators of production rather than on value added. 

According to the Central Bank, the sharp slowdown in the T&T economy, as well as significantly lower crude oil and natural gas prices, led to a worsening of the Central Government’s fiscal accounts for the period October 2015 to June 2016.

“The Central Government deficit rose to $6.2 billion (annualised 4.6 per cent of GDP) over the first nine months of the fiscal year, compared to $2.2 billion in the corresponding year-earlier period,” the bank said.

The document also revealed that the Government has borrowed $11.3 billion so far this year, with $4.66 billion being raised on the local market and US$1 billion ($6.7 billion) on the international capital market. 

The US dollar bond, which was issued in August, took the country’s foreign debt as a percentage of GDP to 13.6 per cent and public sector debt to a projected 54.3 per cent of GDP for 2016, from 45.6 per cent last year, the Central Bank stated. 

But the bond, which was arranged by Deutsche Bank and majority state-owned First Citizens, boosted T&T’s foreign reserves to US$10.3 billion at the beginning of August 2016, which represented 11-and-a-half months of import cover. 

Of the 2017 Budget, the Central Bank stated: “If energy prices do not recover substantially, the upcoming budget for fiscal 2017 will continue to emphasise expenditure restraint.

“On the revenue side, the operationalisation of previously announced measures may be fleshed out, for example the property tax and the tax on internet purchases.”

In terms of the outlook for the T&T economy, the Central Bank said: “Domestically, against the backdrop of lower global energy prices, a reduction in local energy production and a streamlining of Central Government expenditure, growth may be further challenged.” 

Drilling down into the performance of the economy, the Central Bank concluded that T&T’s energy exploration and production sub-sector declined by 10.3 per cent during the first quarter of 2016. And LNG output plummeted by 17.9 per cent as a result of reduced natural gas production. 

Meanwhile, the underperformance of the non-energy sector was largely associated with a decline in activity in the construction (15.7 per cent), manufacturing (6.3 per cent) and electricity and water (1.9 per cent) sectors, according to the Central Bank. 

Reflecting on the sharp reduction in activity in the construction sector, the Central Bank attributed the 15.7 per cent decline to the fact that: “Work on major public sector construction projects has been impacted by the administrative review of the Public Sector Investment Programme as well as mobilisation challenges.” 

Source:
Trinidad Guardian
Saturday September 17, 2016

http://www.guardian.co.tt/news/2016-09-17/central-bank-bulletin-tt-economy-contracts-52