CENTRAL BANK: T&T’S ECONOMIC CRISIS

TRINIDAD and Tobago owes much of the value of what it produces. 

The country’s official debt-to-Gross Domestic Product (GDP) ratio, according to the Central Bank, was 85.8 percent at May 2021. 

This is a climb from 80.9 percent at the end of last September. 

Debt-to-GDP is an economic metric that compares a country’s public debt to what it produces, and is an indication of the ability to repay loans. 

Some economists are insisting that the ratio is closer to 90 percent. 

The statistic is one of several provided in the latest Central Bank Economic Bulletin, providing an insight into the national financial state in the midst of the Covid-19 pandemic. 

The report stated that the budget deficit for the first nine months of the fiscal year (October 2020 to June 2021) was $7.2 billion – compared to $10.7 billion for the comparative period of the previous year. 

“The Government relied heavily on domestic borrowings,” the bulletin stated, “and also tapped the Heritage and Stabilisation Fund (roughly $4.7 billion) to finance the budget deficit,” the bank stated. 

The energy sector slumped by 14.4 percent, while non-energy slipped by 4.2 percent. 

Natural gas output declined by 23 percent. 

Excess liquidity levels have come down from $14.2 billion in October 2020 to $7 billion in $7 billion in July 2021. 

There continues to be declining consumer and business lending, along with a reduced number of real estate mortgages. 

Gross reserves now amount to 8.1 months of import cover, having been marginally reduced to US $6.6 billion at the end of July. 

The labour market “continues to experience considerable slack”, the Central Bank stated, which is economic-speak for high unemployment. 

Inflation remains “muted during the first six months of 2021, reflective of subdued economic activity.” 

The bank stated: “The short-term economic outlook for Trinidad and Tobago will be directly impacted by the (Covid-19) virus’ path and the domestic response.” 

According to the bulletin, “continued efforts to shore up domestic energy output will be critical.’ 

The main challenge, the bank stated, “is balancing the need to provide support for virus eradication (or control) and to vulnerable groups on the one hand, while assuring debt sustainability on the other.” 

The bank called for measures to “take advantage of emerging economic opportunities – constitute essential structural building blocks to unlock private and public sector potential.”