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Central Bank paints gloomy economic picture

Over the ref­er­ence pe­ri­od, gross of­fi­cial re­serves were boost­ed by draw­downs from the HSF and pro­ceeds from Cen­tral Gov­ern­ment bor­row­ings

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Prospects for the do­mes­tic econ­o­my are an­tic­i­pat­ed to be stymied over the short- to medi­um-term as un­cer­tain­ties sur­round­ing the coro­n­avirus pan­dem­ic weigh on glob­al de­mand for en­er­gy prod­ucts.

Fur­ther, eco­nom­ic ac­tiv­i­ty with­in the non-en­er­gy sec­tor will al­so be thwart­ed by the lin­ger­ing ef­fects of the re­stric­tions as­so­ci­at­ed with the COVID-19 re­sponse.

These were among the find­ings in lat­est Eco­nom­ic Bul­letin from the Cen­tral Bank which al­so not­ed that head­line in­fla­tion re­mained low and sta­ble in­to the first three months of 2020, re­flec­tive of con­strained con­sumer de­mand.

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Low­er en­er­gy rev­enues in the first nine months of fis­cal 2019/20 con­tributed to a larg­er deficit in the Cen­tral Gov­ern­ment ac­counts com­pared to the cor­re­spond­ing pe­ri­od one year ear­li­er

The bank not­ed that Cen­tral Gov­ern­ment op­er­a­tions reg­is­tered an over­all deficit of $10.7 bil­lion dur­ing the first nine months of the fis­cal year (FY) 2019/20 (Oc­to­ber 2019 – June 2020).

This was larg­er than the deficit of $4.8 bil­lion record­ed in the cor­re­spond­ing pe­ri­od one year ear­li­er and was due to low­er rev­enues, which out­paced the de­cline in ex­pen­di­ture.

The deficit was fi­nanced by a com­bi­na­tion of ex­ter­nal and do­mes­tic bor­row­ings and with­draw­al from the Her­itage and Sta­bil­i­sa­tion Fund (HSF), the bank stat­ed

It not­ed that at the end of Ju­ly 2020, net pub­lic sec­tor debt out­stand­ing in­creased to $120.5 bil­lion (71.7 per cent of GDP) from $103.2 bil­lion (62.2 per cent of GDP) in Sep­tem­ber 2019.

At the end of Au­gust 2020, the bank not­ed gross of­fi­cial re­serves amount­ed to US$7,442.4 mil­lion (8.8 months of im­port cov­er), which was US$513.4 mil­lion high­er than the end of 2019.

Over the ref­er­ence pe­ri­od, gross of­fi­cial re­serves were boost­ed by draw­downs from the HSF and pro­ceeds from Cen­tral Gov­ern­ment bor­row­ings.

The Cen­tral Bank con­tin­ued to in­ter­vene reg­u­lar­ly in the for­eign ex­change mar­ket and sales to the au­tho­rised deal­ers amount­ed to US$890.0 mil­lion to Au­gust 2020.

The in­crease in gross of­fi­cial re­serves sug­gests that the ex­ter­nal ac­counts reg­is­tered an over­all sur­plus dur­ing the first eight months of 2020,” the bank added

COVID-19 mit­i­ga­tion mea­sures dis­rupt­ed T&T’s labour mar­ket dur­ing the first half of 2020, it al­so not­ed.

The Cen­tral Bank main­tained the Re­po rate at 3.50 per cent in June 2020, fol­low­ing a 150 ba­sis points re­duc­tion in March, when it al­so cut com­mer­cial banks’ re­serve re­quire­ment by 300 ba­sis points

The changes in March, along with high­er net ma­tu­ri­ties of open mar­ket op­er­a­tions and in­creased fis­cal in­jec­tions, helped push ex­cess liq­uid­i­ty to a dai­ly av­er­age of $7,307.4 mil­lion over the first eight months of 2020 com­pared to $3,379.8 mil­lion over the same pe­ri­od in 2019.

How­ev­er, the de­lib­er­ate boost to liq­uid­i­ty has not yet en­gen­dered a pick-up in pri­vate sec­tor cred­it on the whole, es­pe­cial­ly busi­ness lend­ing

Nev­er­the­less, the bank said con­sumer lend­ing con­tin­ued to be ro­bust, sup­port­ed main­ly by lend­ing for debt con­sol­i­da­tion and re­fi­nanc­ing.

Re­flect­ing falling in­ter­est rates in the US mar­ket, the TT-US rate dif­fer­en­tial im­proved to 86 ba­sis points at the end of Au­gust.

Jobs de­clined

The bank al­so not­ed that 365 peo­ple lost their jobs in the first half of 2020 as COVID-19 stay-at-home or­ders in March led to lay­offs, es­pe­cial­ly in the man­u­fac­tur­ing sec­tor

It said these peo­ple were re­trenched in six months, ac­cord­ing to no­tices filed at the Min­istry of Labour and Small En­ter­prise De­vel­op­ment

The lock­down mea­sures to mit­i­gate the spread of the virus re­sult­ed in ad­just­ments in the labour mar­ket, such as fur­loughed em­ploy­ment, lay­offs, pay cuts, and re­duc­tions in work­ing hours

There was a sharp falloff in de­mand for labour, and job ad­ver­tise­ments in the print me­dia de­clined by 43.4 per cent (year-on-year) dur­ing the first half of 2020,” the bank said