The most re­cent read­ing of the do­mes­tic econ­o­my by the Cen­tral Bank in­di­cates that eco­nom­ic ac­tiv­i­ty picked up in the sec­ond quar­ter, dri­ven by an im­prove­ment in the non-en­er­gy sec­tor which coun­tered a de­cline in out­put from the en­er­gy sec­tor.

In its Mon­e­tary Pol­i­cy Re­port for No­vem­ber 2023, the Cen­tral Bank point­ed out that the im­proved eco­nom­ic ac­tiv­i­ty in the sec­ond quar­ter may have con­tributed to an im­prove­ment in labour mar­ket con­di­tions as the un­em­ploy­ment rate fell and labour force par­tic­i­pa­tion im­proved.

Em­ploy­ment gains were not­ed in the con­struc­tion (in­clud­ing elec­tric­i­ty and wa­ter); whole­sale, re­tail, restau­rants and ho­tels; and com­mu­ni­ty, so­cial and per­son­al ser­vices sec­tors.

But the Cen­tral Bank not­ed flat or de­clin­ing out­put of some of T&T’s main for­eign ex­change earn­ers:

“Low­er crude oil (4.8 per cent) and nat­ur­al gas (0.7 per cent) pro­duc­tion had trick­le-down ef­fects on the pro­duc­tion of oth­er com­modi­ties in the sec­tor.

“Though nat­ur­al gas out­put re­mained rel­a­tive­ly sta­ble over the three-month pe­ri­od (sec­ond quar­ter), pro­duc­tion lev­els were low­er com­pared to one year ago—when sev­er­al up­stream projects came on stream. This mod­er­a­tion of nat­ur­al gas out­put fil­tered through to the re­fin­ing sec­tor, which in turn ex­pe­ri­enced a mar­gin­al de­cline in the pro­duc­tion of liq­ue­fied nat­ur­al gas (LNG) (0.7 per cent) and a sharp fall in the pro­duc­tion of nat­ur­al gas liq­uids (NGLs) (35.0 per cent)...

“Petro­chem­i­cal pro­duc­tion was ham­pered by re­duced out­put of fer­tilis­ers as am­mo­nia and urea pro­duc­tion fell by 4.6 per cent and 40.4 per cent, re­spec­tive­ly. In ad­di­tion to the falloff in nat­ur­al gas pro­duc­tion, urea pro­duc­tion was af­fect­ed by main­te­nance ac­tiv­i­ty in the sec­ond quar­ter of 2023.

"De­spite the up­stream chal­lenges, the pro­duc­tion of methanol im­proved (9.8 per cent) over the pe­ri­od, re­flect­ing a base ef­fect, giv­en the clo­sure of the M5000 fa­cil­i­ty in the cor­re­spond­ing pe­ri­od of 2022.”

The Cen­tral Bank not­ed that head­line in­fla­tion eased to 1.3 per cent in Oc­to­ber 2023 on ac­count of a de­cel­er­a­tion in both food and core in­fla­tion, but con­di­tions in the for­eign ex­change mar­ket re­mained “rel­a­tive­ly tight.”

From a macro-eco­nom­ic per­spec­tive, it is good that T&T’s non-en­er­gy sec­tor is dri­ving eco­nom­ic ac­tiv­i­ty and that head­line in­fla­tion in Oc­to­ber 2023 com­pared with Oc­to­ber 2022 has de­clined

It is not great that T&T’s pro­duc­tion of LNG is flat, pro­duc­tion of crude has slipped, while out­put of some of the petro­chem­i­cals man­u­fac­tured at the Point Lisas In­dus­tri­al Es­tate is down.

The pro­duc­tion pic­ture, plus the fact that the prices of oil, LNG and petro­chem­i­cals in 2023 are low­er than last year may mean less tax rev­enue and a re­duc­tion in the amount of for­eign ex­change sold by en­er­gy com­pa­nies to au­tho­rised deal­ers.

Forex mar­ket

On the forex is­sue, the Cen­tral Bank stat­ed:

“Pur­chas­es of for­eign ex­change by au­tho­rised deal­ers from the pub­lic (sup­ply to deal­ers) amount­ed to US$4,009.8 mil­lion over Jan­u­ary to No­vem­ber 2023, a de­crease of 15.6 per cent rel­a­tive to the same pe­ri­od a year ear­li­er.

“De­creased pur­chas­es fol­lowed a 25.9 per cent de­cline in con­ver­sions by en­er­gy com­pa­nies rel­a­tive to the same pe­ri­od in 2022.

"Dur­ing Jan­u­ary to No­vem­ber 2023, pur­chas­es from the en­er­gy sec­tor ac­count­ed for 69.6 per cent of to­tal for­eign cur­ren­cy pur­chas­es over US$20,000 in val­ue,” ac­cord­ing to the Cen­tral Bank.

The Bank said the in­jec­tion of liq­uid­i­ty from VAT bond re­pay­ments dur­ing the ref­er­ence pe­ri­od re­duced the need for tra­di­tion­al en­er­gy sec­tor con­ver­tors to ac­cess the fi­nan­cial sys­tem for do­mes­tic cur­ren­cy at lev­els to which the mar­ket has be­come ac­cus­tomed. The mon­e­tary au­thor­i­ty must be hop­ing that this re­duc­tion in the sup­ply of for­eign ex­change to the au­tho­rised deal­ers is a tem­po­rary phe­nom­e­non.

On the de­mand side of the for­eign ex­change equa­tion, the Cen­tral Bank out­lined:

“Sales of for­eign ex­change by au­tho­rised deal­ers to the pub­lic (forex de­mand) reached US$5,701.3 mil­lion over Jan­u­ary to No­vem­ber 2023, a de­crease of 4.6 per cent rel­a­tive to the same pe­ri­od a year pri­or.

“Based on re­port­ed da­ta for trans­ac­tions over US$20,000, cred­it cards (40 per cent), re­tail and dis­tri­b­u­tion (18.5 per cent), en­er­gy com­pa­nies (16.9 per cent) and au­to­mo­bile com­pa­nies (5.8 per cent) made up the bulk of for­eign ex­change sales by au­tho­rised deal­ers to the pub­lic.

“The net sales gap reached US$1,691.4 mil­lion dur­ing the pe­ri­od. To sup­port the mar­ket, the Cen­tral Bank sold US$1,241.9 mil­lion to au­tho­rised deal­ers.”

It is in­ter­est­ing to note that the gap be­tween de­mand and sup­ply of for­eign ex­change for the first 11 months of the year av­er­aged US$153.72 mil­lion a month for the pe­ri­od.

And that Cen­tral Bank sold an av­er­age of US$112 an av­er­age of US$112.81 mil­lion a month to the au­tho­rised deal­ers to sup­port the mar­ket.

That would have left the mar­ket short by an av­er­age of US$41 mil­lion a month.

Banks’ prof­its

T&T has three com­mer­cial banks op­er­at­ing in the coun­try that are pub­licly list­ed: the First Cit­i­zens Group; Re­pub­lic Fi­nan­cial Hold­ings Ltd and Sco­tia­bank T&T.

By my cal­cu­la­tion, the to­tal af­ter-tax prof­it of those three banks for their re­spec­tive 2023 year ends was $3.3 bil­lion.

The fi­nan­cial year of First Cit­i­zens and Re­pub­lic end­ed on Sep­tem­ber 30, 2023, while Sco­tia­bank’s year-end was Oc­to­ber 30, 2023.

• ↓First Cit­i­zens de­clared $776.75 mil­lion in af­ter-tax prof­it; up 5.9 per cent over 2022

• ↓Re­pub­lic Bank Group de­clared $1,932 mil­lion in af­ter-tax prof­it; up 14.7 per cent over 2022

• ↓Sco­tia­bank T&T’s prof­it was $678 mil­lion in af­ter-tax prof­it; down by less than 1 per cent.

It is im­por­tant to note that not all of Re­pub­lic’s ex­tra­or­di­nary prof­it per­for­mance de­rived from its T&T op­er­a­tions, as the fi­nan­cial ser­vices group has op­er­a­tions in 13 oth­er coun­tries.

But 45 per cent of Re­pub­lic’s net in­ter­est in­come comes from T&T, 54 per cent of its oth­er in­come is de­rived from the lo­cal mar­ket, while 49 per cent of its loans orig­i­nat­ed in this coun­try.

Re­pub­lic Fi­nan­cial Hold­ings Ltd’s prof­its for its 2023 fi­nan­cial year were the most ever de­clared by a lo­cal bank. First Cit­i­zens Group CEO, Karen Dar­basie, told the Busi­ness Guardian last month that about 80 per cent of the bank’s rev­enue is from T&T.

Na­tion­al In­sur­ance

Sys­tem as­sets drop

T&T’s Min­is­ter of Fi­nance, Colm Im­bert de­liv­ered a state­ment in Par­lia­ment on the re­port on the op­er­a­tions of the Na­tion­al In­sur­ance Board of Trinidad and To­ba­go (NIBTT) and au­dit­ed fi­nan­cial state­ments for the fi­nan­cial year end­ed June 30, 2023.

Sev­er­al things were note­wor­thy about that re­port:

1 The to­tal funds of the Na­tion­al In­sur­ance Sys­tem (NIS) de­creased by 3.2 per cent from $29.94 bil­lion in 2022 to $28.99 bil­lion in 2023.

The to­tal as­sets de­creased by 2.7 per cent from $30.24 bil­lion in 2022 to $29.44 bil­lion in 2023.

The to­tal as­sets of the NIS for the fi­nan­cial year end­ed June 30, 2021 amount­ed to $31 bil­lion. That means the as­sets of the NIS de­clined by 5 per cent from Ju­ly 1, 2021 to June 30, 2023.

Is any­one wor­ried that the as­sets of T&T’s NIS de­clined for two con­sec­u­tive years?

2 Al­so wor­thy of note is the fact that the ad­min­is­tra­tive cost of the NIS in­creased for the 12 months end­ed June 30, 2023.

Mr Im­bert said: “Ad­min­is­tra­tive cost for the 2022 pe­ri­od was record­ed at $280.9 mil­lion, in­creas­ing by 24.4 per cent from $225.9 mil­lion in 2022; al­so in­creased as a per­cent­age of con­tri­bu­tion in­come, from 5 per cent in 2022 to 5.8 per cent in 2023.”

What did the Na­tion­al In­sur­ance Board spend the ad­di­tion­al $54 mil­lion on in its 2023 fi­nan­cial year?

3 On a more pos­i­tive note, ac­cord­ing to Mr Im­bert: “The num­ber of con­trib­u­tors in the NIS dur­ing 2023 was record­ed at 491,726, in­creas­ing by 8 per cent from 455,448 in 2022, while the num­ber of ben­e­fi­cia­ries in­creased by 4.1 per cent from 214,490 to 223,281 that is an in­crease of OVER 36, 000 con­trib­u­tors.”

Dear read­ers: This is the last Busi­ness Guardian pub­li­ca­tion for 2023. The first Busi­ness Guardian pub­li­ca­tion for 2024 will be Thurs­day, Jan­u­ary 4. Hap­py Hol­i­days!