3
THE MACRO-ECONOMIC FRAMEWORK
6.
The annual growth rate in Trinidad and Tobago experienced significant fluctuation from
2009 to 2012 declines in 2009 and 2011. In fiscal 2013, GDP growth is estimated at 1.6 percent
– a marginal increase from the 1.2 percent growth in 2012. This consecutive year of moderate
growth is an encouraging indication of recovery across the economy and is expected to continue
into the medium term with growth projections of between 2 – 3 per cent to 2016.
7.
Sound economic management will be executed through prudent fiscal and monetary
policy to maintain a stable rate of foreign exchange, continued low unemployment and
manageable levels of public debt. The fiscal deficit realised in 2011/12 was 1.1 percent of GDP
and was expected to increase to 2.5 percent for 2012/13 – well below the target of 4.6 per cent.
A continued moderate accommodative fiscal position is expected to support economic recovery
without adverse effects on inflation or unmanageable increase in public debt given current
indications of slack in the economy.
8.
Core inflationary pressures are expected to remain well contained and core and headline
inflation are expected to remain below 4 and 10 percent respectively. The Central Bank Repo
rate, maintained to date at 2.75 percent to which it was lowered in September 2012, will likely
remain low in light of continuing low inflation and slow private sector credit growth estimated at
just 4 percent in 2012. The issuance of a TT$1 billion long term Government Bond in 2013 is
expected to assist in absorbing excess liquidity.
9.
Excess liquidity is however, a long standing issue in the economy and will require
significant mobilisation of domestic savings. Continued financial and capital market reforms
should have increasing impact in this area. Additionally several initiatives implemented and in
train will continue to increase stability and opportunities for investment in the financial sector.
Securities legislation passed at the end of 2012, which enhanced the powers of the Securities and
Exchange Commission, initial public offering (IPO) of First Citizens Bank and other legislative
reforms pending to modernise insurance regulation and bring credit unions under the regulatory
power of the Central Bank.
10.
The slight deterioration in the external account is expected to be reversed as domestic
investment opportunities increase and improve. Gross official reserves fell slightly in the first
quarter of 2013 but remain at a comfortable level, affording an estimated 10.3 months of import
cover.
11.
Output in the energy sector is estimated to have increased only marginally while the
energy sector’s contribution to GDP is estimated to have fallen slightly in 2013 to 39.7 per cent.
Output in the energy sector is relatively inelastic in the short term but price declines over the
medium term can adversely affect the fiscal balance as well as the external position with respect
to both reserves and the current account surplus. Over the medium term, steady output and
growth in the energy sector will be dependent on coordination of maintenance outages to prevent
and minimise supply disruptions, continued progression into lucrative non-US natural gas
markets and continued exploration activity (especially deep water exploration). Development of
