December 27, 2024
Global economic growth remained stable in 2024 despite ongoing geopolitical conflicts in Eastern Europe and the Middle East. The International Monetary Fund’s October 2024 World Economic Outlook forecasts global activity to expand by 3.2%, slightly lower than the 3.3% registered in 2023. Progress toward inflation targets allowed major central banks to ease monetary policy in the second half of 2024. In December, the U.S. Federal Reserve reduced its target range for the federal funds rate by 25 basis points to 4.25-4.50%, marking its third rate cut of the year.
In Trinidad and Tobago, the Central Statistical Office reported a 1.5% year-on-year increase in real GDP for the first quarter of 2024, driven by a resilient non-energy sector and a slight rise in energy sector output. However, natural gas availability constraints negatively impacted the energy sector in the second and third quarters. Non-energy production strengthened, particularly in trade, transportation, storage, and construction. The unemployment rate fell to 4.8% in the second quarter of 2024 from 5.1% in the previous quarter.
Headline inflation remained very low, recorded at 0.5% in November, up from 0.2% in October. Core inflation was unchanged at -0.3%, while food inflation rose to 3.1% from 2.4%. Financial system liquidity was comfortable in the second half of 2024, following a reduction in the reserve requirement from 14% to 10% in July. Commercial banks’ excess reserves at the Central Bank averaged $6.4 billion in early December.
Private sector credit momentum accelerated in September 2024, with business loan growth outpacing consumer lending. Business credit growth was broad-based across manufacturing, distribution, agriculture, construction, and finance, while consumer financing growth focused on durables, notably automobiles. High domestic government financing pushed up local treasury bill rates, and combined with U.S. Fed rate cuts, narrowed the negative TT/US interest differential on 3-month treasuries by 63 basis points to -233 basis points in November 2024.
The Monetary Policy Committee (MPC) acknowledged the steady global economic expansion amid significant policy uncertainty. Key domestic factors included low inflation, buoyant credit conditions, ample liquidity, and continued non-energy output growth. The MPC decided to maintain the repo rate at 3.50%, emphasizing the need for vigilance as conditions could change rapidly. The Central Bank will continue to monitor developments and take necessary actions.
Source: (Central Bank of Trinidad and Tobago)
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