PORT OF SPAIN, Trinidad (CMC) — The Central Bank of Trinidad and Tobago (CBTT) says the local economy remains growth-challenged at present even as it acknowledged that early signs of improvement have appeared in the energy sector, as exploration activity picked up in the third quarter and output of natural gas is expected to rise with the coming on-stream of the Juniper project.

In its latest Monetary Policy Announcement, the CBTT said that growth in energy and energy-related production is expected to eventually pull up activity in other non-energy sectors which is still subdued. “Available indicators on construction and distribution point to continued sluggishness in these areas, while official statistics however suggest that the unemployment rate has remained relatively steady at just under four per cent on average in 2016,” the CBTT added.

The CBTT said that the economic environment in both advanced and emerging economies continues to improve, with generally positive growth being recorded and inflation approaching target ranges, noting that within this context, authorities in some advanced nations have begun to more actively address monetary policy normalization.

In the US, the Federal Reserve will gradually reduce its holdings of securities starting October 2017, and there is anticipation that another hike in the Fed Fund’s rate will occur this December. There are signals that the Bank of England may also increase interest rates within the next few months,” the CBTT said.

It said that in the rest of the world, particularly in Asia, the Middle East and the Caribbean, geopolitical tensions and recent natural disasters have put severe strains on public and private sector economic management.

The CBTT said that the rate of increase in general prices in Trinidad and Tobago has stayed low.

Data from the Central Statistical Office point to headline inflation of just 1.4 per cent in July 2017, with core inflation, which excludes food prices, also at 1.4 per cent.

It said that the average for both these measures over the year to July was 2.2 and 2.1 per cent respectively. Food inflation measured 1.4 per cent in July 2017 compared to 0.5 per cent in June.

Interest rates in the banking system have remained virtually unchanged for the year so far.

The CBTT said the strongest loan categories in July 2017 were for consumers – 4.1 per cent growth year-on year – including the sub components for real estate mortgages and credit cards, while credit to businesses rose by just 0.3 per cent.

Liquidity in the commercial banking system remained steady in the third quarter of 2017 with banks’ excess reserves at the Central Bank averaging around TT$2.8 to TT$3 billion.

There was a small increase in the TT-US interest rate differential on three-month Treasuries from 14 to 16 basis points between July and mid-September 2017.

The CBTT said that it continues to note the very narrow TT-US differential and the prospect of US rate rises at the end of the year.

At the same time, it said it observed that the nascent signs of recovery in the energy sector had not yet translated into a boost to other sectors and that inflationary pressures were currently not substantial.