COUNTRY ECONOMIC REVIEW 2019 TRINIDAD AND TOBAGO
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Trinidad and Tobago Dollar (TT$); United States Dollar (US$) US$1=TT$6.78
TRINIDAD AND TOBAGO ECONOMIC BRIEF 2019
OVERVIEW
fell by 8.1%. Liquid natural gas, methanol and ammonia production recorded increases over the 11˗month period. In the non-energy sector, declines were recorded in construction and manufacturing, two of the largest contributors to GDP. Preliminary indicators of cement sales and mined aggregates suggest that construction activity fell. Lower levels of activity in food, drink, tobacco, construction-related chemicals, non-metallic minerals, and printing and publishing point to depressed manufacturing output.
Economic activity in Trinidad and Tobago was flat, following three consecutive years of contraction. The lethargic performance was due to reduced activity in energy, manufacturing, and construction. Inflation remained low and stable. Labour market conditions continued to deteriorate. Public debt rose, private credit slowed despite excess liquidity, and monetary conditions remained tight. The fiscal deficit narrowed due to one-off revenue gains from the 2019 tax amnesty. Net public sector debt at the end of the fiscal year (FY)1 grew further. Private sector credit contracted, reflecting lower aggregate demand. The Central Bank of Trinidad and Tobago (CBTT) maintained the repo rate at 5.0% through 20192. The external position weakened and gross international reserves declined further.
Chart 1: Real GDP Growth
Rel GDP Growth (%)
4 2 0 ‐2 ‐4 ‐6 ‐8 2015
KEY DEVELOPMENTS IN 2019
2016
2017
2018
2019
Source: Central Statistics Office (CSO), International Monetary Fund estimates.
Gross domestic product (GDP) was unchanged (see Chart 1). Preliminary data from the CBTT’s Quarterly Index of Real Economic Activity showed declines in the energy and non-energy sectors for the first half of 2019. In the energy sector, for the period January to November, natural gas production increased by 1.0% despite temporary production outages at the Angelin facility3, while crude oil production
Headline inflation4 slowed to 0.3% at the end of November year-on-year (y/y), reflective of low aggregate demand and low international prices. Food inflation declined to 1.1% in November, from a high of 2.0% in August when vegetable prices rose sharply. Core inflation was 0.6% in November y/y, reflecting mixed price movements as the cost of health care went up, but prices of housing, hotels, restaurants and cafes fell.
FY runs from October to September. The repo rate was increased to 5% in June 2018. 3 The Angelin facility came on stream in February 2019. 4 As measured by the All Items Retail Price Index. 1 2
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TRINIDAD AND TOBAGO ECONOMIC BRIEF 2019
increased outlays on wages and salaries, interest payments, and transfers. Capital expenditure rose by 2.9% in 2018/19 (equivalent to 2.2% of GDP) but below the historical five-year average of 3.4% of GDP.
Debt/GDP (%)
Chart
Chart 2: Total Unemployment 5.0
3:
Fiscal
and
Debt
Performance
70.0
1.0
60.0
0.0 ‐1.0
50.0
‐2.0
40.0
‐3.0 30.0
‐4.0
20.0
‐5.0
10.0
‐6.0
0.0
4.0
Primary Balance/GDP (%)
Labour market conditions continued to deteriorate with increased retrenchments and declining participation rates. Increased lay-offs in the oil and gas sector affected the unemployment rate (see Chart 2). The number of persons retrenched during January to October rose by 27% y/y. The labour force participation rate declined to 58.7% in the first half of 2019, compared with 59.7% over the same period in 2018.
‐7.0 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Net Debt to GDP
3.0
Primary Balance (Right Axis)
%
Source: CBTT and Caribbean Development Bank (CDB) Staff Calculations.
2.0 1.0
Net public sector debt8 rose to 63.3% of GDP at the end September 2019, up from 60.1% a year earlier. Financing was sourced primarily from domestic debt (TT$7.7 billion [bn]) compared with external debt (TT$2.5 bn). Interest payments increased by 2.4%. The risk of short-term debt distress was low, as assets in the Heritage and Stabilisation Fund and liquid holdings in sinking funds at the end of 2018/19 averaged 25.7% and 4.0% of GDP, respectively.
0.0 2014
2015
2016
2017
2018*
Source: CSO; *at June 2018.
Fiscal balances improved in FY 2018/19 but remain precarious. Higher revenues contributed to a smaller overall deficit of 2.4% of GDP in FY 2018/19, compared with 3.6% in FY 2017/185. The primary surplus in 2018/19 was 0.6% of GDP, compared with a deficit of 0.6% in the previous year (see Chart 3). Total revenue increased by 7.9%, due partly to gains from the energy sector6 and the recently concluded tax amnesty7.
Monetary conditions remained tight. The policy rate was kept at 5.0% throughout 2019 and into 2020. The interest rate gap between three-month Trinidad and Tobago and US treasury securities remained negative. CBTT cited low inflation, slow recovery of the domestic economy, and falling international interest rates as key considerations for the policy rate remained
A decline in non-energy revenue tempered the overall improvement, and resulted in a larger non˗energy fiscal deficit of 11.5% of GDP compared with 10.5% in the previous year. Total expenditure rose by 3.4% due to
FY runs from October to September. This included one-off settlements from BP and Shell. 7 The tax amnesty was implemented over a 3.5-month period from mid-June 2019 to end September 2019. 8 Excludes all debt held for monetary policy purposes (treasury bills, treasury notes, treasury bonds, and liquidity bonds). 5 6
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TRINIDAD AND TOBAGO ECONOMIC BRIEF 2019
deficit on the external account. Preliminary data for the quarter ending June indicate a widening of the external deficit to 5.9% of GDP from 2.9% of GDP in 2018.
unchanged. CBTT’s efforts to manage liquidity resulted in an increase in open market operations with an injection of TT$5.7 bn into the financial system over the period May to October. CBTT also maintained its fortnightly sales of foreign currency to authorised dealers.
Chart 4: Net Official Reserves Months of imports
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The financial system remained stable and well capitalised, but private sector credit slowed. As of September, growth in private sector credit tapered off to 4.3% compared with 4.5% in July. Consistent with subdued business activity in the onshore sector (construction and manufacturing), business credit contracted by 5.5% for the first nine months of 2019, following flat growth in 2018 (0.2%). An increase in consumer credit and real estate lending drove private sector credit. At the end of September, debt consolidation and refinancing and real estate mortgages grew by 5.9% and 10.9% year-onyear, respectively. The ratio of gross nonË—performing loans to total loans was 3.1% at the end of August. The capital adequacy ratio remained relatively stable at 21.5% at the end of August, up from 20.9% at December 2018.
10 8 6 4 2 0
2015
Reserves
2016
2017
2018
2019
Three Month Benchmark
Source: CBTT.
OUTLOOK The outlook for Trinidad and Tobago has become clouded by the outbreak of COVID-19, which has significantly affected developed and developing economies. The collapse in oil prices in early 2020 has had a significant negative impact, and the government has had to implement a number of fiscal measures to boost the economy. These measures are putting increasing pressure on government finances.
Net official international reserves declined for the fifth consecutive year. Reserves dropped to US$6.9 bn (eight months of imports) at the end of November from US$7.6 bn (nine months of imports) at the end of 2018. The reduction in reserves was consistent with a widening of the overall
Given the uncertainty as to how long this situation will persist, it is very difficult to forecast how the economy will perform in 2020 and beyond. This will be addressed in an updated Economic Brief later this year.
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TRINIDAD AND TOBAGO ECONOMIC BRIEF 2019
DATA The table below summarises the key economic and social indicators underpinning this country brief. These data are taken from a number of sources, and are the latest available at time of publication. Some are subject to revision. Selected Indicators
Real GDP Growth (%) Average Inflation (%) Unemployment (%) Primary Balance (% of GDP) FY Public Sector Debt (% of GDP)
2015r 1.8 4.7 3.5 0.4 46.6
2016r -6.3 3.1 3.6 -2.8 57.8
Sources: CSO, CBTT, CDB. Notes: e ‒ estimate (as at January 31, 2020); n.a. – not available. *at November 2019. **at June 2018 (latest data available).
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2017r -2.3 1.9 4.4 -6.0 61.8
2018r -0.2 0.9 3.8** -0.6 60.1
2019e 0.01 0.3* n.a. 0.6 62.0
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