The Central Bank is predicting that there could be continued layoffs and reduction in working hours as the impact of the Coronavirus pandemic continues.
In its latest Monetary Policy Report the Bank noted that the stay at home orders had hurt the labour markets and any increase in employment and the pace at which this may happen will depend on an increase in aggregate demand.
The report read:”The adjustments in the labour market that have already taken place, including layoffs and reductions in working hours, could persist for some time depending on the strength of aggregate demand.”
According to the Bank the pace of recovery of the T&T economy in 2021 will depend on both local and global factors.
“The pace and extent of recovery in 2021 will depend on the still unknown path of this deadly pandemic and the repercussions on global trade, commodity markets and domestic business and employment.” According to the Monetary report.
The Monetary Report showed that the collapse of oil, gas and petrochemical prices were significant due to mild winters, Coronavirus and Trade wars which all led to a collapse in demand and an over-supply situation.
According to the Central Bank between January and February, global crude oil demand plummeted in reaction to the spread of COVID-19, putting downward pressure on oil prices.
It read: “From January to April, crude oil prices dipped by almost US$41 per barrel, a decline of nearly 71 per cent. Natural gas prices fell by 14.3 per cent over the same period, reflecting the persistently weak demand due to mild weather in importing countries. In May, crude oil prices staged a small recovery following the drop to zero, but prices remained far below pre-pandemic levels.”
This has in part resulted in the Central Government’s deficit being projected to be higher than initially budgeted for FY2019/20 resulting in a rise in public sector borrowing, supplemented by drawdowns from the HSF.
The Central Bank said it expects a smaller surplus in the country’s external current account due to relatively subdued energy prices and more sluggish demand for Trinidad and Tobago’s non-energy exports from CARICOM.
Before the COVID-19 pandemic, in the fourth quarter of 2019, the Trinidad and Tobago economy displayed tentative signs of modest activity the Bank said.
The report noted that Preliminary data show a 1.4 per cent increase (year-on-year) in the Central Bank’s Quarterly Index of Economic Activity in the fourth quarter, led by the non-energy sector Construction activity turned upward with the acceleration of public sector infrastructure programmes such as the Curepe Interchange and other major road works. One of several indicators used to track wholesale and retail trading activity is the number of motor vehicle registrations.
The local foreign exchange market remained tight over the first five months of 2020 the bank said.
It noted that lower energy sector conversions led to reduced purchases from the market by authorised dealers. The economic situation was also reflected in a decline in demand for foreign exchange the Bank revealed.
At the end of May 2020, official international reserves stood at US$6.9 billion, equivalent to 8.0 months of import cover.