Not surprisingly, the continuing local decline in oil and gas production has had a significant negative effect on the Trinidad & Tobago economy. Provisional estimates by the Central Bank suggest that Real GDP for 2016 was -2.3% with contraction in the non-energy sector as well.
These declines have led to a worsening in the labour market where, not only did unemployment increase to 4.4%, (up from 3.8% in the previous quarter and 3.2% in the corresponding quarter of 2015), but there was also a large decline in advertised job vacancies further suggesting that the demand for labour had weakened
Headline inflation remained largely unchanged as the dampening effects of the slowing economy outweighed inflationary pressures such as the depreciation of the domestic currency over the year, changes to the Value Added Tax (VAT) system, the reduction in the petroleum subsidy and revisions to the business levy and green fund. In the banking system, lending to business was flat and there was a continuing trend of increasing interest rates as well as a slowing of both private sector credit growth and real estate mortgage lending.
As stated by us several times in the past, the local real estate market (and in particular, the commercial sector) tends to mirror the economy. In recent times, due to a large extent to the slowdown in the economy, there is now a glut of office accommodation available. With this in mind as well as the increasing lending rates referred to earlier, many local businesses appear to be shelving any expansion plans for the time being until some form of recovery is evident in the local economy.
On the residential side, there are a rising number of expatriate workers leaving the country due to the slump in the energy sector. Consequently, rental rates are estimated by local experts to have dropped by 30% in the last two years.
Despite all the above, the local economy is expected to benefit in the latter part of 2017 from several new energy projects such as the recently commissioned Angostura Phase 3 project by BHP Billiton as well as bpTT’s Juniper Project production from which is likely to begin in the third quarter of 2017. Furthermore, international oil and gas prices are expected to rise due to the recent OPEC agreement to cut production.
Nonetheless, the Central Bank expects that overall, local economic conditions are likely to remain challenging in 2017 as the economy continues to face reduced export earnings, constrained fiscal accounts and rising unemployment.
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