Business View Caribbean - Sept. / Oct. 2014

60 %XVLQHVV 9LHZ ‡ &DULEEHDQ ² 6HSWHPEHU ‡ 2FWREHU 7ULQLGDG 7REDJR T rinidad and Tobago’s economy continues to gain momentum and is expected to expand in real terms by 1.9 percent in calendar 2014, following growth of 1.7 percent in 2013. This outlook is premised on a projected 1.0 percent in the petroleum sector complimented by a 2.5 percent expansion in the non-petroleum sector. The services sub-sector, with 51.8 percent, continues to be the largest contributor to nonpetroleum GDP. The energy sector is expected to record its second Trinidad & Tobago forecasting 1.9 percent real growth for 2014 consecutive year of positive economic growth, with a smaller expansion of 1.0 percent in 2014, down from 1.6 percent in 2013 and reflecting expansions in the exploration and production, petrochemicals, service contractors and distribution sub-industries. Headline inflation continued its downward trajectory in 2014, remaining at subdued levels year-on-year for the first six months of 2014 settling at 3.0 percent by June following some fluctuations earlier in the year. Core inflation remained relatively stable throughout (PSRZHULQJ 3HRSOH WK 6XVWDLQHG (FRQRPLF * 7ULQLGDG 7REDJR 6HSWHPEHU ‡ 2FWREHU ² &DULEEHDQ ‡ %XVLQHVV 9LHZ the period, decreasing marginally to 2.5 percent in June from 2.6 percent in January. Year-on-year, headline inflation has remained at single digit levels for 23 consecutive months. Unemployment edged up to 3.7 percent in the fourth quarter of fiscal 2013, from the previous historical low of 3.5 percent in the third quarter. In most industries, with the exception of construction; petroleum and gas; and wholesale and retail trade, restaurants and hotels, unemployment rates were below the national average. With the subdued inflationary environment prevailing and the continued, albeit weakened, economic growth of the domestic economy, the Central Bank of Trinidad and Tobago maintained an accommodative monetary policy stance, in an attempt at boosting economic activity. While there has been a small pick-up in core inflation in the early months of 2014, Headline inflation has remained under 5 percent. During the nine- month period October 2013 to June 2014, the bank kept its main policy rate, the Repo rate, unchanged at 2.75 percent, while utilizing a number of liquidity management instruments in an attempt to contain the high liquidity levels. In response, commercial banks maintained both their basic prime lending rates and the interest rate on term loans at 7.5 percent in an effort to encourage borrowing. The weighted average deposit rate was also held constant at a subdued 0.2 percent over the period. As business lending recovered lending to the private sector by the consolidated financial system rose by 5.8 percent on a year-on-year basis to March 2014, up from 3.2 percent in September 2013 and 2.4 percent one year earlier. Commercial banks’ lending to the private sector expanded by 6.0 percent in March 2014 compared with 4.6 percent in March 2013. The composition of the growth in private sector credit has become more evenly distributed as business lending recovered in the first quarter of 2014 coming on the heels of 14 consecutive months of year-on-year declines. Business loans granted by the consolidated financial system rose 2.1 percent in March 2014 with the recovery in business lending being driven by strong loan growth to the distribution sector of 23.1 percent and the services sector of 7.9 percent. Consumer credit by the consolidated financial system continue to expand by 5.8 percent on a year-on-year basis to March 2014, manifested by strong growth in housing related loans. Historically low mortgage rates continued to spur demand for real estate mortgage loans in 2014 with the supply of real estate mortgage loans granted by the consolidated financial system remaining in double-digit territory. The Central Bank expanded its liquidity management framework in December 2013, increasing the URXJK URZWK