The Cen­tral Bank of Trinidad and To­ba­go (CBTT) has paint­ed a grim pic­ture of T&T’s econ­o­my in its lat­est Mon­e­tary Pol­i­cy Re­port.

The Bank said eco­nom­ic ac­tiv­i­ties con­tract­ed in the first half of 2020 in both the en­er­gy and non-en­er­gy sec­tors. A de­cline in out­put was seen in nat­ur­al gas, crude oil, liq­ue­fied nat­ur­al gas (LNG) and petro­chem­i­cals, es­pe­cial­ly methanol and am­mo­nia.

“As sev­er­al busi­ness­es closed and oth­ers re­duced their op­er­a­tions, de­clines were record­ed for sev­er­al non-en­er­gy sec­tors, such as Whole­sale and Re­tail Trade (Ex­clud­ing En­er­gy), Con­struc­tion, and Man­u­fac­tur­ing (Ex­clud­ing En­er­gy and Petro­chem­i­cals).” The re­port read.

It not­ed that labour mar­ket ad­just­ments in­clud­ed fur­loughed em­ploy­ment, lay­offs, pay cuts, and re­duc­tions in work­ing hours.

It added; “De­spite the grad­ual re-open­ing of the econ­o­my, labour de­mand soft­ened, re­sult­ing in high­er re­trench­ments. Job ad­ver­tise­ments in the print me­dia, a proxy for labour de­mand, de­clined dur­ing May to Oc­to­ber 2020.”

How­ev­er, growth was record­ed for Re­al Es­tate Ac­tiv­i­ties and the Fi­nan­cial and In­sur­ance Ac­tiv­i­ties.

It re­vealed that the Gov­ern­ment’s ac­counts came un­der in­creased strain in fis­cal year (FY) 2019/20 as a re­sult of the COVID-19 cri­sis. The Bank re­vealed that da­ta from the Min­istry of Fi­nance show that the bud­get deficit jumped to 11.2 per cent (as a per cent of Gross Do­mes­tic Prod­uct (GDP)) in FY2019/20 from 2.6 per cent in FY2018/19. Pub­lic rev­enue col­lec­tions de­clined by 27.1 per cent in FY 2019/20 from FY2018/19 due to low­er en­er­gy prices and a small­er cor­po­ra­tion tax take as busi­ness op­er­a­tions were cur­tailed. Pub­lic ex­pen­di­tures, how­ev­er, in­creased due to high­er out­lays on trans­fers and sub­si­dies and the cap­i­tal pro­gramme to shore up the health sys­tem and sup­port those ad­verse­ly af­fect­ed by the pan­dem­ic.

In the case of the coun­try’s for­eign ex­change po­si­tion the CBTT said con­di­tions in the for­eign ex­change mar­ket re­mained rel­a­tive­ly tight dur­ing the first ten months of 2020.

Pur­chas­es of for­eign ex­change by au­tho­rised deal­ers from the pub­lic de­clined over Jan­u­ary to Oc­to­ber 2020,

rel­a­tive to the same pe­ri­od a year pri­or.

The Bank said this de­cline in pur­chas­es was re­lat­ed to a re­duc­tion in con­ver­sions by en­er­gy com­pa­nies, while the de­mand for for­eign cur­ren­cy al­so slipped in the con­text of trade and trav­el re­stric­tions as well as the state of ag­gre­gate de­mand. By the end of No­vem­ber 2020, of­fi­cial in­ter­na­tion­al re­serves stood at US$7.1 bil­lion or about 8? months of im­port cov­er.

Ac­cord­ing to the Bank the glob­al econ­o­my suf­fered an un­prece­dent­ed fall in re­al out­put over the first half of 2020 main­ly be­cause of the COVID-19 pan­dem­ic.

It not­ed that the virus has led gov­ern­ments to in­tro­duce pub­lic health mea­sures such as lock­downs, so­cial dis­tanc­ing, and clo­sures of non-es­sen­tial busi­ness­es, which re­sult­ed in sharp and deep eco­nom­ic con­trac­tions dur­ing the first six months of the year. How­ev­er it notes that glob­al de­mand has been ris­ing slow­ly as some economies re­laxed lock­down mea­sures in May and June prompt­ing mea­sured im­prove­ments in eco­nom­ic ac­tiv­i­ty.

The CBTT ex­pects in 2021 the do­mes­tic eco­nom­ic out­look will be cen­tred around the lin­ger­ing ef­fects of the pan­dem­ic, which are ex­pect­ed to per­sist well in­to the first three quar­ters of the new year. It said go­ing in­to the pan­dem­ic, T&T had a rel­a­tive­ly good start­ing point, with sig­nif­i­cant buffers, in­clud­ing siz­able in­ter­na­tion­al re­serves and its sov­er­eign wealth fund (Her­itage and Sta­bi­liza­tion Fund) but it warned that giv­en the fi­nite na­ture of these buffers it is im­per­a­tive that the tran­si­tion be man­aged very care­ful­ly.

“As in most oth­er coun­tries, fis­cal ac­tion will re­main at the core of the com­bined macro-eco­nom­ic pol­i­cy

re­sponse. A del­i­cate bal­ance will con­tin­ue to be re­quired in pro­vid­ing in­dis­pens­able sup­port to the poor and dis­ad­van­taged com­mu­ni­ties—who have been dis­pro­por­tion­ate­ly im­pact­ed by the pan­dem­ic—while keep­ing an eye on the debt sit­u­a­tion. The cur­rent high liq­uid­i­ty en­vi­ron­ment means that mon­e­tary pol­i­cy may need to be in a

hold­ing pat­tern, but ready to ad­just quick­ly as fi­nan­cial con­di­tions evolve.