Economy estimated to fall 2% to June.

The domestic economy is provisionally estimated to have contracted by close to 2 percent in the first half of 2015 in Trinidad and Tobago. Domestic economic outlook has deteriorated the country’s central bank says in a recent release on the economy.
The report went on to state, “continued shortfalls in natural gas production saw the energy sector decline by an estimated 3 ½ percent in the first six months of 2015. The non-energy sector, which has provided support to the overall economy for the past few years lost momentum, declining by around 1 percent in the first half of 2015. This decline was mainly due to a slowdown in construction, distribution and manufacturing. Early indicators point to continued sluggish economic performance in the third quarter of 2015.”
Trinidad and Tobago’s economy is highly dependent on the petro chemical industries and has suffered from a sharp fall in the world market prices of produce from the sector. This decline was mainly due to a slowdown in construction, distribution and manufacturing. Government revenues are highly dependent on inflows from the sector. The expectation is for lower government spending going forward and the possibility of a devaluation of the country’s currency that has undergone an appreciation with the local dollar being stable for several years while inflation climbed sharply, leading to a possible overvalued Trinidad dollar. The country just changed governments and that could bring major shift in economic policies against the back ground of falling export earnings and the possibility that oil prices could fall some more on the world market.
With excess liquidity remaining at a comfortable daily average of $3.3 billion over the past three months (July – September 21, 2015), the MPC also decided to maintain an aggressive liquidity management programme so as to strengthen the impact of rising interest rates throughout the financial system. As at mid-September 2015, the median commercial bank prime lending rate had increased to 8 ½ percent from 8 ¼ percent in July 2015.
Domestic inflationary pressures have not materialized as initially expected. On a year-on-year basis to August 2015, headline inflation slowed to 4 percent from just over 5 ½ percent in July 2015. Core inflation was stable at just over 1 ½ percent, while food inflation decelerated to around 8 percent from double-digit territory of 11 ½ percent in July 2015. Although current price pressures seem contained, disruptions to domestic agricultural supply and higher production costs facing select food industries could lead to rising food inflation. Increased consumer spending driven in part by recently concluded public sector wage agreements, as well as robust consumer borrowing, could also push up inflationary pressures.