17
2014 ANNUAL REPORT
1.8% in 2014. Developing countries, many of which appear to
be settling back to growth levels lower than the pre-crisis boom
and post-crisis recovery, are expected to grow by 4.4% this year.
The October edition of the International Monetary Fund’s (IMF)
World Economic Outlook, forecasts that the world economy
will expand by 3.3% this year and 3.8% in 2015, both downward
revisions from April’s forecasts.
New geo-political developments such as the disruption in
the Middle East caused by Islamic State Militants and the spread
of the Ebola virus, if not checked, could contribute to much
smaller growth in 2015.
Trinidad and Tobago
The domestic economy is estimated to have grown by 1.9% in
2014, up marginally from 1.7% in 2013. This performance was
primarily based on increased activity in both the energy and
non-energy sectors, which themselves experienced divergent
fortunes. While growth in the non-energy sector accelerated to
2.5% in 2014, up from 1.6% in the previous year, energy sector
growth slowed to 1%, compared to 1.6% in 2013.
The estimated 1% expansion of the energy sector in
2014 occurred in the context of high oil and gas prices. The
performance of the non-energy sector improved in 2014, driven
by a 3% expansion of the services sub-sector, which offset the
third successive contraction of the manufacturing sector.
Having maintained an accommodative policy stance for
four years, the Central Bank of Trinidad and Tobago increased
the ‘Repo’ rate by 25 basis points to 3% in September 2014. The
move was influenced in part, by the increasing likelihood of a
US policy rate increase by the middle of 2015. This expectation
has made US dollar denominated assets even more attractive
relative to assets denominated in the local currency. As a result,
the Central Bank responded to the need to protect the local
economy against capital flight by pushing up domestic interest
rates.
With the global demand for oil constrained by fragile growth
and global supply currently booming, oil prices have been
trending down since June 2014. Several forecasters expect oil
prices to average between US$75 and US$80 per barrel during
the first half of 2015. If this occurs, growth of the domestic
energy sector is likely to be curtailed. Production is expected
to remain flat during the year, with no significant increase in
output. The domestic economy is projected to grow by 2.1% in
2015.
Barbados
The year 2014 was indeed another challenging one for the
Barbados economy. Latest official data released by the Central
Bank of Barbados revealed economic activity remained stagnant
during the first nine months of 2014. The non-tradable sector
grew marginally by 0.3% during the period while the tradable
sector fell marginally by 1.2%. Tourism, the country’s main driver
of growth, recorded only modest gains during the period,
while high deficits on the fiscal and current accounts have kept
Barbados in a difficult position. The rate of unemployment was
estimated at 13.2% during the first half of the year, while anemic
demand kept inflationary pressures subdued, at 1.7%. The IMF
anticipates the economy will contract by 0.6% in 2014.
Barbados’ tourism sector remained flat between January
and September 2014, growing by only 0.1%. However, this
represents an improvement from the 2% shrinkage that
occurred during the same period in 2013. Weak tourism
revenues have contributed significantly to the pressure placed
on the country’s foreign currency reserves, which grew slightly
to US$532.9 million (14.7 weeks of import cover) in September
2014, compared to US$508.2 million for the same period in
2013, but remains below the US$572.1 million recorded at the
end of 2013.
Government’s fiscal accounts are constrained by high debt
and deteriorating fiscal deficit. At the end of the fiscal year in
March 2014, the deficit reached 12.5% of GDP, up from 8.8%. The
Central Bank revealed that public debt stood at 109.2% of GDP
as at September 2014.
Economic activity is expected to be constrained by tight
fiscal measures adopted by the country. Although the tourism
sector is expected to improve, as the world economy improves,
Notwithstanding thechallengingeconomic conditions, highpublicdebt,
andsignificant financial fragilitieswhichexist especially in the tourism
dependent economies inwhichweoperate, theGroup isexpected
tocontinue toperformsatisfactorily.
