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.
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.
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.