governor's power point monetary policy report november 2011 (2)

8/3/2019 Governor's Power Point Monetary Policy Report November 2011 (2)

1/13

Conference Facilities, Port-of-Spain, December 7, 2011

Copyright, Central Bank of Trinidad and Tobago, 2011


2/13

The European debt crisis and US fiscalproblems have heightened uncertainty

Annual GDP growth ratesnnual GDP growth ratesin financial markets.

4

5United StatesUnited Kingdom

Major centra an s ave coor inateto increase global liquidity. 3

t

gJapanEuro Area

Intense talks are underway to rescuethe euro.

1

2pc

But investors remain skeptical and a -1

0

further round of downgrades may bein the cards.

-2


3/13

Growth in China and India continue Emerging Market GDP Growthmerging Market GDP Growthto be around 8-9%.

14 Brazil China India

Emerging Market GDP Growthmerging Market GDP Growth

u n a on s ecom ng muc moreof a concern. 10

12

In Latin America very strong growthslowed in the first half of 2011.

68

pc

With some slowdown in second half 0

24

as macroeconomic policies tightened. 0 I II III IV I II2010 2011


4/13

A modest revival in 2011 comparedto 2010 for several countries

Quarterly GDP Growth:uarterly GDP Growth:Selected Caribbean Economieselected Caribbean Economiesincluding Jamaica and Barbados. Q3:

10Q4:10

Q1:11

Q2:11

Selected Caribbean Economieselected Caribbean Economies

Guyana and Suriname continue topost strong growth.

Barbados . . . .Belize 1.1 5.5 6.7 -1.0

However, some countries are ECCU -4.0 3.2 -0.2 n.a.- -

high public debt.Jamaica . . . .Source: CCMF, Central Bank of Barbados, Statistical Unit of

Belize and Statistical Unit of Jamaica.

Strong linkages with advancedeconomies could put a damper on

e expans on n our sm, ra e an

remittances in 2012.


5/13

For the first half of 2011, GDPcontracted by 0.9% (despite a 10

Trinidad and Tobago: Real GDP Growthrinidad and Tobago: Real GDP Growthsmall increase in GDP in Q2).

468

10 Energy Non-Energy Total

Energy output s ippe asmaintenance operations

-4-202

pc

Construction and other non--10-8-6

energy activities remained

anemic.

In the second half, production While curfew restrictionsconstrained distribution and

.

other activities.


6/13

Headline inflation has been inlow sin le di its since March.

Index of Retail Pricesndex of Retail Prices(YearYear-onn-Year Per cent Change)ear Per cent Change) There are si ns that food inflation 37

42

(YearYear onn Year Per cent Change)ear Per cent Change)

has started to turn back up.

2732

n Food

But core inflation remains wellcontained.121722pc Food

All Items - Headline

Although decelerating, global

food rice rises could affect 2

7 Core

domestic prices in comingmonths.

-3


7/13

R R d P i L di RR d P i L di R The repo rate was lowered to its

historic low of 3.00%. 1214

Basic Prime Lending Rate

Repo Rate and Prime Lending Rateepo Rate and Prime Lending Rate

In turn, banks reduced loan 6810

pc

rates.

246

Re o Rate

mu a ng a mo es ncrease ncredit to the private sector.

15Private Sector Credit: Yearrivate Sector Credit: Year-onn-Year Per cent changeear Per cent change

Mainly to consumers, especially

in real estate. 05

1015

c

Credit demand by businesses1

-10-50

Pc

Consumer Business Real Estateas not revive strong y ut t e

decline may be bottoming out.

-15


8/13

Excess reserves rose from $1.5b in 6,000Commercial Banks Excess Reservesommercial Banks Excess Reserves

e rs mon s o o .billion in September.

3,0004,0005,000

TMn

This was related to acceleration ofgovernment expenditure around the 0

1,0002,000

end of the fiscal year.

Fiscal Balance and Public Sector Debt to GDPiscal Balance and Public Sector Debt to GDP

e government poste a e c t o3.6% of GDP in FY2011.

2530354045 Fiscal Balance:GDP Public Sector Debt:GDP

Mainly financed domestically -includin from drawdowns of 05

10152025

pc

balances at the Central Bank. -10-50

2007/2008 2008/2009r 2009/2010 2010/2011P


9/13

Exports increased by 22% in first half of

G R d I t CR d I t C.

Im orts (es eciall ca ital) slowed in 146

Gross Reserves and Import Coverross Reserves and Import Cover

line with domestic demand.

1012

1214

ImportCover(RightAxis) GrossOfficialReserves

(LeftAxis) onet e ess orex sa es rom ea ers rose

by 12% in January-October.

68

810 Mo

h$Bo

With the Central Bank selling US$1.3 b

to dealers, 15% more than in 2010.

46

46

By September, international reserveswere US$9.3b (12 months of im orts).

02

02


10/13

External conditionsxternal conditions are expected to be uncertain at best, or most.

,postpone effective policy action.

In Europe, the debt crisis will likely get worse before it gets better.

Domestic policy tightening to cool potential overheating could lead toslower growth rates in emerging markets.

Growth in the Caribbean is expected to be modest at best.


11/13

For 2012, the Bank is projecting real GDP growth of 1.5%.

The projections reflects the following domestic factors:

,from businesses;

Im rovement in ace of overnment ca ital ro ect execution

Cautious boost to private sector confidence from fiscal stimulus.

In energy sector, regularization of gas and petrochemical output

expected.

In non energy sector, boost to construction from government projects.


12/13

Barring weather related shocks or fresh commodity price,

Ma or rowth is not ex ected in em lo ment but labour-

intensive government projects could create short term jobs.

Key downside risks to growth include

A pronounced worsening of the international environment;

Bottlenecks in governments project implementation.


13/13

governor's power point monetary policy report november 2011 (2)

Documents