Trinidad economy contracts

The Trinidad and Tobago economy contracted by 1.4 per cent last year, according to the latest figures released by the Central Bank of Trinidad and Tobago (CBTT).

But Central bank Governor Ewart Williams said that the economy had "stabilised" citing the fact that inflation is fairly under control, the country has a healthy foreign-exchange position and a "strong, robust" financial system.

According to the latest figures released by the CBTT, headline inflation stood at 5.7 per cent in November, increasing from 3.7 per cent in September, while core inflation remained fairly consistent throughout the year between one and 1.15 per cent.

"Low consumer demand is more closely reflected in the core inflation rate and that has remained constant at around 1.0 to 1.5 per cent the last year to year and a half. However, headline inflation is largely driven by movements in food prices," said Williams.

"Food prices came down earlier in the year but that was before bad weather and international food prices affected the local market. Then, later in the year, we felt the impact of these and that increased food price inflation to 12.3 per cent as at end of November," he said.

The CBTT said inflation dropped into single digits for most of 2011, strengthening the case for continuing its accommodative monetary policy.

The repo rate was reduced to its lowest level of 3.0 per cent, prompting banks to also lower loan and deposit rates.

"Faced with lower demand for their products, businesses remained reluctant to increase their financial leverage. Some firms as well as individuals also had greater difficulty in servicing their loans on time, resulting in an increase in non-performing loans. This was especially true for debts associated with high-end real estate projects," the central bank said.

"By the final quarter of the year, however, there were indications of a small revival in private-sector credit demand."

- CMC