The Central Bank of Trinidad and Tobago (CBTT) Friday said that real gross domestic product (GDP) grew by three per cent during the first quarter of this year.
In its Monetary Policy statement for December, the CBTT said that indicators suggest a steady economic recovery led by the non-energy sector during the first nine months of 2023.
It said activity in the transportation and storage, wholesale and retail trade, excluding energy, electricity and water, excluding gas and construction sectors, continued to underpin the non-energy sector’s positive performance.
The CBTT said that labour market statistics show that the unemployment rate declined to 3.7 per cent in the second quarter of 2023 compared with 4.9 per cent one quarter earlier.
It said inflation continued to moderate. According to the Central Statistical Office (CSO), headline inflation measured 1.1 per cent (year-on-year) in November 2023 compared with 4.1 per cent three months earlier.
The central bank said that the deceleration was driven by lower food inflation, which slowed to 0.8 per cent from 5.6 per cent over the same period. Core inflation, which excludes food items, slowed to 1.2 per cent from 3.7 per cent, as the full pass-through of higher fuel prices implemented in late 2022 was complete.
“However, there was an uptick in producer prices (2.6 per cent) in the twelve months to June 2023 from 2.0 per cent in March, while price increases for building materials (3.1 per cent) continued to decelerate over this quarter,” the CBTT said.
It said with respect to financial indicators, liquidity remains ample. Commercial banks’ excess reserves at the Central Bank stood at a daily average of TT$4.9 billion in November 2023 and hovered around this level up until December 22 this year.
“However, a recent uptick in government domestic financing operations has added to the variability of excess liquidity. In this context, there was a significant pick-up in interbank activity during the fourth quarter of 2023. The repo window was also accessed on one occasion at the end of November 2023 – the first time since January 2022,” the CBTT added.
It said that the momentum in private sector credit was sustained.
In the 12 months to October 2023, financial system credit grew by 7.7 per cent and the CBTT said that spurred in part by a resurgence in motor vehicle loans, consumer lending growth reached 8.9 per cent in October 2023, surpassing the rate of business credit expansion in August 2023.
Business lending increased by 7.6 per cent during the same period, while real estate mortgage credit growth slowed somewhat (5.8 per cent in October 2023 compared with 6.8 per cent in August 2023).
“There is evidence that short-term interest rate differentials are narrowing. Heightened government activity on the domestic capital market contributed to a slight upward shift in shorter-term domestic rates,” the CBTT said, noting that the differential between interest rates on three-month treasuries in Trinidad and Tobago and the United States moved to minus-440 basis points in November 2023 from minus 464 basis points in August 2023.
The central bank said that in reviewing external developments, the Monetary Policy Committee (MPC) took particular note of the rapid slowdown in global inflation and the less aggressive monetary stance adopted by major central banks.
“However, ongoing and emerging geopolitical factors are clouding the external economic policy outlook for 2024. Domestically, macroeconomic conditions appear favourable based on the retreat of inflation, sustained private sector credit growth and robust non-energy sector activity.”
The CBTT said that short-term TT/US interest rate differentials remain a concern regarding external balance but could narrow further based on the projected downward path of foreign rates.
“Taking all these factors into account, the MPC agreed to maintain the repo rate at 3.50 per cent. At the same time, the MPC considered that the dynamic nature of external economic developments in 2023, their repercussions on Trinidad and Tobago’s open economy, and the expected continuation of that situation in 2024 warranted continued vigilance and agility on the part of the Central Bank to potentially rapidly changing circumstances. “
The CBTT said that it will continue to carefully monitor and analyse international and domestic developments and prospects.