Country Report Trinidad and Tobago June 2009

Outlook for 2009-10

• The already low popularity of the prime minister, Patrick Manning, will be eroded further by the economic downturn and rising violent crime.
• Policymaking will become more challenging in 2009-10 as the deterioration of the fiscal and current-account balances leaves Trinidad and Tobago exposed to global financial and economic woes.
• After slowing in 2008 to 3.5%, GDP growth will weaken further in 2009, to 0.9%, as the global recession bites. A mild global economic recovery will help to lift GDP growth to 1.9% in 2010.
• Supply-side inefficiencies and loose fiscal policy will ensure that inflation does not subside as rapidly as in other countries in the region. As a result, we expect inflation to ease in 2009, but remain high at an average of 9.8% in 2009-10.
• The exchange rate will remain around its quasi-fixed level of TT$6.3:US$1 throughout the forecast period, supported by a strong reserves position.

Monthly review

• The attorney-general, Bridgid Annisette-George, resigned her post on May 27th, citing a potential conflict of interest with respect to an investigation into a major Trinidad-based financial conglomerate, CL Financial.
• A commission of inquiry into the Urban Development Corporation of Trinidad and Tobago (UDeCOTT), a state-run company, has led to allegations of serioud corruption.
• At its May monetary policy meeting, the Central Bank of Trinidad and Tobago left its overnight repurchase (repo) rate unchanged at 8%, following a 50-basis-point cut in April and a 25-point cut in March.
• The central government posted a fiscal deficit of 2.6% of GDP in the first half of the 2008/09 fiscal year (October-September) as energy revenue slumped and expenditure soared.
• Despite signs of decelerating domestic demand, consumer prices increased slightly in April as a result of higher domestic food prices. Core inflation also rose, reflecting higher prices for healthcare, education and housing.
• The fallout from the January collapse of a troubled Trinidad-based regional conglomerate, CL Financial??