REVIEW OF THE ECONOMY 2013
51
SUSTAINING GROWTH, SECURING PROSPERITY
further reinforced by non-bank lending which
recorded a contraction in lending of 11.4 percent
in March 2013, compared with a decline of 6.3
percent in October 2012.
Consumer credit granted by the consolidated
financial system has continued to expand by
4.1 percent in March 2013, up from 2.9 percent
in October 2012. In contrast, business credit
granted by the consolidated financial system
has remained constrained, contracting by 3.1
percent in March 2013, compared with growth
of 2.1 percent in October 2012. Real estate
mortgage lending remained robust throughout
fiscal 2013, up 15 per cent in March 2013
compared to 11 per cent in October 2012. This
is largely associated with the relatively low level
of investment opportunities and yields generally
available to investors.
INTEREST RATES
The continuing accommodative monetary
policy stance of the Central Bank of Trinidad and
Tobago over the 9-month period October 2012
to June 2013 was reflected in the Repo Rate
being reduced from 3.0 percent in August 2012
to 2.75 percent where it has remained up to June
2013. This generated the anticipated response
by the commercial banks, as the basic prime
lending rate of commercial banks fell from 7.8
percent in June 2012 to 7.5 percent in June 2013
(Figure 15)
.
The interest rate on time loans declined from
7.75 percent in June 2012 to 7.5 percent in
May 2013. The weighted average deposit rate
remained subdued at 0.02 percent during the
nine-month review period ending June 2013,
down marginally from 0.2 percent in June 2012.
The weighted average loan rate held constant at
7.5 percent for much of the review period ending
June 2013, after declining from 7.8 percent in
October 2012 to 7.5 percent in November 2012.
MONEY SUPPLY AND COMMERCIAL
BANKS’ DEPOSITS AND CREDITS
Over the review period October 2012 to June
2013, all categories of Monetary Aggregates
continued to experience strong growth. Narrow
Money (M-1A), comprising currency in active
circulation and demand deposits, rose by 15.5
percent up from 4.3 percent during the previous
comparative period.Apreference by investors to
holdmore liquid balances in the banking system,
given the low interest rates on alternative
investments likely played a major role in fuelling
this expansion. This disposition of investors was
evidenced in the final quarter of 2012, with the
launching of a new product by one bank which
generated a significant increase in the level of
demand deposits held by the banking system as
savings were converted to the new product.
Broad Money, M-2 increased by 12.4 percent
during the nine-month period ending June
2013 on the strength of a substantial increase
in time deposits associated with the continuing
provision of fiscal stimulus by the Government.
M-2*, which takes into account foreign currency
deposits, increased by 12.6 percent in March
2013, on a twelve-month basis, based on an
increase of 21.5 percent in foreign currency
bank deposits.
Notwithstanding the prevailing low interest rate
environment, private sector credit expansion
by the consolidated financial system remained
subdued during the first six months of fiscal
2013. Private sector credit expanded to 2.4
percent in March 2013 following an expansion
of 3.7 percent in October 2012. Private sector
credit expansion was mainly supported by the
commercial banks, albeit at a lower rate. At the
end of March 2013, the year-on-year increase in
lendingbycommercial bankswasup4.5percent,
as compared to 5.1 per cent in October 2012.
The persistent weakness in credit expansion
by commercial banks to the private sector was
THE MONETARY SECTOR
