The Central Bank Governor has said that it is not all doom and gloom on the economic front. While delivering the feature address at the Second Monetary Policy Forum in Tobago last week, the Central Bank Governor said there was room for optimism in the coming year, as the country’s GDP was forecasted to grow by 2.5 per cent. Rambarran, said that while Trinbagonians were more likely focus on the “negative”, they needed to realise that the economy has in fact shown “tremendous resilience” in the face of global pressures.
The Central Bank governor drew reference to when he assumed the office two years ago, when T&T’s economy faced the challenges of a sharp contraction in economic growth, soaring food prices, a declining external reserve position and weak business confidence.
He said citizens had to appreciate that this position had improved; food inflation had gone down to single digits, the foreign exchange situation was set to be resolved within the coming weeks and business confidence in the economy was returning and was soon to be bolstered by a resolution of the CLICO issue.
Rambarran told those gathered that Trinidad and Tobago was in “recovery mode”. As evidence, the Central Bank governor used increased sales in cement and an upsurge in construction and stable rates of inflation. Headline inflation, he said, was currently at 21/2 per cent indicating that economic activity was improving. The Central Bank governor also noted that consumer borrowing continued to grow apace.
But while Rambarran observed that there was room for optimism in T&T’s economic outlook, he said the bank was not being complacent. He said that the growing economy, rising consumption and rises in the prices of international agricultural commodities may fuel an upsurge in inflation He said this was something the Central Bank was on the look-out for and prepared to handle.
He also observed that as an emerging market, this country was not shielded from the effects of actions in the world’s largest economies, specifically, the US and China. He told the audience that China’s economy had fallen below projected growth and that this was likely to cause a “drag” on the global economic recovery. This, he said, was an effect of a world economy, even though past the worst days of the 2008 crash, was still unpredictable.
“Central Banks and other policy makers around the world have been grappling for more than five years now with an economic crisis that is constantly mutating and it’s still not clear how the crisis is going to evolve from here.” A result of this “mutation”, Rambarran said at mid 2014, world economic growth appeared as though it would be stuck in a “subdued” phase.
The Central Bank governor identified other situations that may bear watching including the scale back of the US Federal Reserve’s expansionary monetary policy over the past five years. Rambarran said T&T, like other emerging economies, would be left to treat with any fallout arising out of the US’s monetary tapering on its own. He also drew reference to the Russia-Ukraine conflict, which he said could prove to be a “double edged” sword for T&T.
“On one side any escalation in tensions between Russia and the Ukraine could result in higher crude prices. On the other side, wheat prices could increase, which will translate into higher food prices for T&T,” Rambarran said.