(Updated 13th January 2012)

While it was generally believed that the global economy would recover strongly in 2011, this never happened. The earthquake in Japan as well as crises in the European and US economies all transpired to shatter confidence and spark uncertainty in the recovery to the extent that the International Monetary Fund (IMF) revised downwards the global outlook for 2011.

The global economic climate, coupled with the recent State of Emergency and curfew, had a telling effect on the local economy. In its November 2011 Monetary Policy Report, the Central Bank of Trinidad & Tobago stated that, according to provisional estimates, the local economy contracted by 0.9 percent for the first half of 2011. This in part has led to not only core inflation remaining relatively low.

Consequently, the Central Bank of Trinidad & Tobago has continued its policy of a low “repo” rate which has led to a lowering of lending rates by commercial banks and an increase in consumer loans and real estate lending. While private sector loan demand however continues to be weak there are signs that the decline in business loans are slowing. Also, local stock prices have been increasing as several companies are showing healthy profits and the All Trinidad and Tobago Index rose by 24.77% for 2011.

In the real estate market, mortgage loans granted continued to increase. This has been caused by the high liquidity in the financial system and the prevailing low lending rates. The cost of new construction, after falling in 2009, has also risen gradually. All the above factors have given rise to an increase in residential real estate values. According to the Central Bank of Trinidad & Tobago, the estimated price of a typical three-bedroom house stood at approximately $1 million over the first half of 2011 compared with a low of $850,000 in 2009.

Nevertheless, market conditions in the short term continue to be uncertain. While in the April 2011 Monetary Policy Report, the Central Bank had projected real growth in the range of 1-2 per cent for 2011, it has now stated that “..a small contraction in real GDP—on the order of 1.4 per cent—is more likely for 2011”. It has also forecasted growth of 1.5 per cent for 2012 with the caveat that “..the balance of risks is tilted towards the downside”.

The outlook for the future therefore remains cloudy and a lot is still dependant on the global economy and local private sector confidence. While in the past the local real estate market has followed the economy, it is possible that this time the real estate market could lead the long-awaited recovery in the economy. That however, remains to be seen.