Home' Trinidad and Tobago Guardian : November 21st 2013 Contents BG8 | NEWS
BUSINESS GUARDIAN www.guardian.co.tt NOVEMBER 2013 • WEEK THREE
T&T s headline inflation will remain relatively high,
Scotiabank s International Economics Group in
Toronto has said.
In its "Executive Briefing" on T&T for November 2013, the
bank said: "Headline inflation will remain volatile and relatively
high in the foreseeable future as it is highly dependent on
food prices, with T&T being a net food importer. Headline
inflation decelerated from 5.1 per cent year-on-year in August
to 3.0 per cent in September, significantly lower than the 7.7
per cent rate registered a year ago; however, the core component
will likely stay close to the 3.0 per cent year-on-year level.
"In an attempt to support a pro-growth strategy through
an accommodative monetary policy stance, the Central Bank
has maintained the administered repo rate at 2.75 per cent
since September 2012. Based on the Central Bank s latest state-
ment, authorities remain vigilant regarding excess liquidity in
the financial system."
On the country s fiscal and current account balance, Scotia
said: "The country s budgetary position has been deteriorating
recently with the fiscal deficit moving from 0.1 per cent of
gross domestic product (GDP) in the 2010-11 fiscal year (October
to September) to an estimated level of 2 per cent in 2012-13.
We expect this trend to remain in place as energy revenues
The bank said that "once production restarts, energy prices
are expected to be lower than in previous years" and added
that "government spending will remain elevated as stimulus
programmes are intended to support the economic recovery."
Officials estimate the budget will return to balance by 2017,
the bank said. "The country s external position remains solid,
although waning, with a current account surplus estimated
to average around 7.0 per cent of GDP over the forecast horizon
compared with 16 per cent of GDP over the past five years."
Scotia said exports, particularly natural gas, will increase
modestly while import growth will accelerate as economic
On the topic of growth, the briefing said: "The economy
of T&T seems to be picking up---albeit slowly---as a result of
government stimulus, loose monetary conditions and a rebound
in the non-energy sector. Non-energy output, accounting for
close to 60 per cent of total GDP, has been expanding at faster
rates compared with energy production, which has been decel-
erating due to maintenance and updates of the sector s infra-
structure. Additionally, energy prices have been moderating
significantly compared with previous years, providing a lower
export and revenue base for the country.
"Furthermore, reduced demand for imported energy in the
US will continue to pose challenges for the country, as exporters
will seek new markets for their petroleum products. Domestic
demand will remain subdued with credit growth recovering
at a very modest pace while government spending will accelerate
as a result of fiscal stimulus. We expect the nation s real GDP
to expand by around 1.5 per cent in 2013 and by 2.33 per cent
The report authored by Scotiabank Group economist Daniela
Blancas said on the topic of foreign exchange: "The current
exchange rate regime will remain in place for the foreseeable
future, providing confidence among investors, particularly the
ones in the energy sector.
"Although the Central Bank maintains an official floating
exchange rate policy, authorities regularly intervene in the
market to moderate volatility, confining the currency in a
narrow trading band in a de-facto fixed-currency scheme.
The T&T dollar (TTD) has averaged $6.38 per US dollar (USD)
so far this year. In response to some episodes of constrained
liquidity in the last few years, the Central Bank has adjusted
the foreign currency supply mechanism, providing some relief
to currency pressures.
"The stock of foreign reserves (currently valued at US$9.3
billion) resumed its upward trend in January; however, it still
remains slightly below last year s level."
On sovereign debt and credit ratings, the bank said: "The
country s sovereign debt profile remains stable with long-
term sovereign credit ratings among the highest of the Caribbean
countries. Standard and Poor s maintains an "A" rating while
Moody s holds a "Baa1" assessment, both with a "stable" out-
The bank said the Heritage and Stabilisation Fund, which
currently maintains assets valued at around 19 per cent of
GDP, remains "a solid shield for the economy and a significant
source of income for the Government in case of a marked
energy price decrease."
Funds can be withdrawn if energy prices drop by ten per
cent of the budgeted level, Scotia explained to its customers
in the briefing. The budgeted price of oil is US$85 per barrel.
Up to press time, the West Texas Intermediate (WTI) crude
price, on which T&T s budget is primarily predicated, was
US$92.95 per barrel.
"The International Monetary Fund (IMF) forecasts that the
government s gross debt will remain at a manageable level -
35 per cent of GDP on average for the coming two years -
after increasing from 33 per cent of GDP in 2011 to close at
38 per cent in 2012, reflecting mainly an insurance company
failure," the briefing said.
Under the heading "Institutional Framework and Political
Environment," the bank said: "Economic recovery, security
issues and drug trafficking will remain key focus areas for the
current administration. Although Prime Minister Kamla Per-
sad-Bissessar s party, the People s Partnership, (which includes
the United National Congress party and other minor parties)
maintains a significant majority in Parliament, tensions among
political forces within the coalition have emerged, testing the
partnership s union and weakening the Government s political
capital. General elections are scheduled for May 2015.
"On the international agenda, negotiations with Venezuela
on cross-border energy disputes will remain a key priority.
Relations with countries in South America will strengthen as
T&T seeks new markets for its exports."
On the financial sector, the Scotiabank economist wrote:
"According to the IMF s 2013 Article IV Consultation, the
financial sector in T&T remains sound. Although commercial
banks are well capitalised and liquid with provisions increasing
significantly, other financial institutions remain outside the
supervision structure. Total credit to the private sector continues
to grow at a low pace of around 3.0 per cent year-on-year
in July, with consumer lending expanding faster by close to
6.5 per cent year-on-year in the same month."
Headline inflation to
remain relatively high
The T&T Coalition of Services Industries
(TTCSI) is taking the first step to initiate export
of services to the United States.
The group is leading a delegation to the
United States today at the 37th Annual Con-
ference on the Caribbean and Central America
in Washington DC. The delegation is expected
to launch the Services of the Caribbean (SOCA)
during its visit. Included is the delegation is
Nicholas Galt, chairman of the Latin American
and the Caribbean Chambers of Commerce.
The launch comes as stakeholders in various
sectors of the economy have suggested services
should be exported and the Caribbean Basin
Initiative (CBI), which expires in 2014, should
be expanded to include services.
The United States is one of T&T s largest
export markets and exporting services from
T&T or Caricom member states could increase
TTCSI chief executive officer Nirad Tewarie
said services in 2012 contributed to less than
ten per cent of gross domestic product (GDP).
While the effort to boost export service income
is a private sector one, Tewarie is confident
the intuitive would get support from Caricom
"The governments realise that what we are
doing is seeking to expand trade and exports
from the region in a sector which they have
deemed as priority. I don t expect overnight
you are going to see dramatic changes, but
what we are doing is opening the doors," Tewarie
He said although the CBI will expire in 2014,
the outcome of today s discussions can be
included in the discussions for the new CBI
"We can t wait for last minute. What we are
doing is we are starting this with enough time
to do the preparatory work, to hopefully build
some consensus, create attention that will allow
us to achieve a favourable result."
The inclusion of export of services is only
present in the Economic Partnership Agreement.
Exporting services, according to Tewarie, is "a
little harder than exporting goods and a little
trickier because it often involves people moving
and, therefore, there are immigration matters."
He said immigration matters are not taken
into account in trade agreements.
"The trade negotiators always say immigration
is a different department and, therefore, there
are potential barriers to entry such as visas,"
TTCSI to launch Caribbean services in the US
Nicholas Galt, chairman of the Latin
American and the Caribbean Chambers of
Nirad Tewarie, TTCSI chief executive officer
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