Home' Trinidad and Tobago Guardian : June 7th 2015 Contents On June 1, Jwala Ram-
barran, Central Bank
governor delivered the
feature address at the
4th monetary policy
forum. These are some
highlights from his
Global economy in a "new mediocre
-A warning from the IMF s managing direc-
tor about a "new mediocre" in the global
economy i.e. low growth for a long time.
- Apart from the US and UK, growth
remains anemic in the Euro area and fragile
-Risks to fledgling global growth including
geopolitical tensions, a stronger US dollars
triggering financial tensions in emerging mar-
kets and the tightening of US monetary pol-
Strong US dollar poses reallocation
"Central bank communications is indeed
tricky business. Most emerging markets got
a taste of these spillovers during the so-called
"taper tantrum," said Rambarran. "Merely the
first hint by then Fed Chariman Ben Bernanke
that US monetary policy would be "tapered"
in the near future was enough to trigger sizeable
portfolio capital outflows from nay vulnerable
economies. Thankfully, Trinidad and Tobago
was not affected."
"Many emerging market economies, such
as Trinidad and Tobago, must prepare for the
potential negative spillovers that could arise
from normalization of US monetary policy.
Strong policies and strong fundamentals will
help tremendously." said the Central bank gov-
T&T Business confidence neutral in 1st
"Since the release of our last Monetary
Policy Report in December 2014, Trinidad and
Tobago s economic performance has been sub-
dued with a rapid succession of negative head-
line economic news restraining the country s
economic outlook." said Rambarran.
He said that the Central Bank estimates
that real GDP contracted by a modest 0.5 per
cent, which was the first such decline since
the second quarter of 2012 when real GDP fell
by a deeper 2.5 per cent.
Ramberran also said, "news of the sharp
drop in oil prices, Moody s downgrade of T&T s
credit rating, and uncertainty associated with
impending general elections worsened eco-
One effect was a change in the results from
the Central Bank s Business Confidence Survey.
For the first quarter of 2015, the business com-
munity changed its outlook from generally
optimistic in the fourth quarter of 2014, to
neutral in the first quarter of 2015.
However despite lower energy prices and
weaker economic performance, the Central
Bank governor said the country s fiscal position
did not deteriorate.
"In fact," said Governor Ramberran. "the
Central Bank recorded a broadly balanced
position in the first half of fiscal 2015, compared
with a small suplus of a 0.25 per cent in the
first half of the previous fiscal year."
"More importantly, energy revenues were
3 per cent higher in the first half of fiscal 2015,
than in the first half of the previous fiscal
year. It seems the diversification of our LNG
export market helped cushion the impact of
falling energy revenue."
"Even though Government said it would
cut spending, this wasn t done," said Ram-
berran. "Capital spending was in fact 2.5 per
cent higher in the first six months of fiscal
2015 compared with the first six months of
the previous fiscal year, while recurrent spend-
ing was 2 per cent higher over the same peri-
He said that towards the end of March 2015,
Central Bank announced its resolution plan
for Clico, the failed insurance giant.
"For Clico creditors and policyholders the
end of this traumatic experience is finally
drawing near. Six years after Clico collapsed,
the company made its first payment of just
over $4 billion to its single largest creditor-
the Government of Trinidad and Tobago.
"Clico is currently processing the pay out
of about $950 million to some 1,500 policy-
holders, who ve endured unimaginable hurt
and pain as a result of the Clico crisis.
"These two creditors are receiving an equal
85 per cent payout in the first distribution.
"The remaining payments are targeted to
be made in two subsequent distributions pend-
ing the sale of certain Clico assets.
"In the coming year, Government stands
to receive some $10 billion from Clico which
if used to reduce public debt will help to reverse
some of the deterioration in the Government s
"Since 2008, over half of the increase in
public debt-about 13 per cent of GDP-was
due to domestic debt arising from the bailout
New foreign exchange intervention
"As we move into the busy summer season,
Central Bank has already put measures in place
to deal with the anticipated higher demand
for foreign exchange, particularly US cash for
travel purposes," said Ramberran.
• Asking commercial banks to raise their
individual limit to above US$500 per person
• Establishing an "intervention system" for
selling US cash to commercial banks as is done
with authorized dealers.
He said that given these two measures, the
Central Bank does not expect the public to
experience any difficulty accessing US cash
for travel purposes.
"We also remind travelers they can use
alternative methods of payment such as credit
cards and can withdraw cash from ATMs
abroad with their TT debit cards."
The Central Bank governor also said "the
rapid succession of negative economic news
seems to have aggravated unsatisfied demand
for foreign exchange. Some members of the
public and business community are bringing
forward their future demands for foreign
exchange. Current demand for foreign
exchange. Current demand for foreign
exchange has jumped to about US$20 million
per day early in 2015."
He urged these sectors of the society not
to bring their demand for foreign exchange
forward and reassured them that foreign
exchange reserves, as of May 2015, stood at
Higher interest rates
In taking the decision to hike the Central
Bank s repo rate by another 25 basis points,
Governor Rambarran said the institution was
concerned about rising inflationary pressures.
"Based on the recently rebased Retail Prices
Index (January 2015 = 100), headline inflation
stood at almost 6 per cent in April 2015. Core
inflation accelerated to a ten-month high of
around 2 per cent in April 2015," he said.
One of the issues in the inflationary pressure
is that "the growth of consumer credit remains
strong suggesting consumers are still willing
to borrow to finance the purchase of new
motor vehicles and other consumer durables-
despite subdued economic conditions.
"We expect recently concluded wage agree-
ments with teachers and civil servants as well
as successful settlement of outstanding nego-
tiations with the Police, Fire and Prisons Serv-
ices to increase consumer spending and infla-
Rambarran also argued that the Govern-
ment s "expansionary fiscal stimulus remains
on track," led by an unchanged non-energy
fiscal deficit at 10.5 per cent and higher capital
Short term prospects
Governor Rambarran said the T&T economy
would remain in a low-growth phase for the
rest of 2015 with the energy sector flat and
the non-energy sector expected to grow at a
slower pace.Higher interest rates may dampen
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt JUNE 7 • 2015
'The good times are over'
Central Bank Governor at Monetary Policy Forum
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