TRINIDAD & TOBAGO ECONOMIC HIGHLIGHTS - JULY PART 2

UNCLAS SECTION 01 OF 02 PORT OF SPAIN 000826 SIPDIS SIPDIS SANTO DOMINGO FOR REGIONAL COMMERCIAL OFFICE E.O. 12958: N/A TAGS: EFIN ELAB ENGR ETRD TD SUBJECT: TRINIDAD & TOBAGO ECONOMIC HIGHLIGHTS - JULY PART 2 The following were notable economic issues in Trinidad & Tobago during the second half of the month of July. ¶1. T&T economy scores with IMF ¶2. Inflation continues to decline ¶3. Tobago inflation also down ¶4. Chinese labor for yet another construction project ¶5. Marginal increase in electricity rates ¶6. T&T should prepare for Africa, Middle East trade ¶1. T&T economy scores with IMF -------------- At the conclusion of the annual International Monetary Fund (IMF) Article IV visit, IMF mission chief Max Alier said that he was pleased with the overall direction of the T&T economy. He commended the GOTT and the Central Bank of Trinidad and Tobago for successfully controlling inflation, although T&T's seven percent inflation currently is still higher than internationally accepted standards. He said that fiscal policy needs to be tightened to help contain inflationary pressures, as signs indicated that the economy was operating at full capacity. Additionally, Alier recommended removing Cost of Living Allowance (COLA) from the GOTT's wage agreements, prompting sharp responses from local labor activists. On efforts to diversify T&T's economy, Alier said that T&T was rightly aiming to use energy resources to reach ambitious development goals before oil and gas reserves were exhausted. ¶2. Inflation continues to decline -------------- According to The Central Bank of Trinidad and Tobago (CBTT) headline inflation continued its decline to 7.3 percent (year-on-year) in June, down from 7.9 percent in May. The Central Bank ascribed this to tightened liquidity conditions and more orderly market conditions for agricultural produce. Food price inflation slowed to 14.7 percent (year-on-year) in June from 17.3 percent in May, due mainly to declines in the price of meat, fish and vegetables, but with increases in the price of bread (13 percent),fruits (24.4 percent), and milk, cheese and eggs (13.6 per cent). Core inflation remained unchanged at 4.5 percent. The CBTT release stated that "the pace of inflation reduction over the next few months remains uncertain, in part, because the proximate causes, such as credit expansion and fiscal injections, are still much stronger than they should be." Recent increases in electricity rates and rising food prices in 
global markets impacting inflationary expectations is a continued concern. Emphasis on liquidity management will be the prime focus of the CBTT's monetary policy stance geared towards reducing inflation to no more than seven percent by the end of the year. The "Repo" rate remains unchanged at 8.0 percent. ¶3. Tobago inflation also down -------------- Figures from the Central Statistical Office in Tobago indicate that Tobago's inflation rate declined by 0.2 percentage points in June, from 4.9 percent to 4.7 percent. The main contributors to the decline in retail price inflation were decreases in the food and non-alcoholic beverage and the clothing and footwear components of the index. ¶4. Chinese labor for yet another construction project -------------- -------------- Prime Minister Patrick Manning announced that Chinese labor again would be used to build a government project, this time a US$40 million Academy of Performing Arts in the southern Trinidadian city of San Fernando. He said that Shanghai-based contractors are mobilizing to begin constructing this southern branch of the Academy of the Performing Arts. Also planned for the south is a US$47 million multi-storey complex which will house government offices, a mall and car parks. Manning did not indicate that Chinese would be constructing this complex. ¶5. Marginal increase in electricity rates -------------- The Regulated Industries Commission (RIC) has proposed marginal increases in the country's electricity rates for the period August 1, 2007, to May 31, 2008. According to RIC Commissioner Harjinder Atwal, 74 percent of customers will not be affected. Residential customers consuming between 1,000 and 1,300 kWh will experience a 0.76 percent increase, and those using 1,600 kWh will pay an additional 1.21 percent. There will be no increase in energy charges for customers using up to 1,000 kWh and no increase in the US$0.95 customer charge to residences. Commercial customers will experience an increase of 2.6 - 2.9 percent, and industrial customers an increase of no more than three percent. Atwal said PORT OF SP 00000826 002 OF 002 that the impact on inflation will be minimal. Electricity rates in Trinidad remain the lowest in the Caribbean. ¶6. T&T should prepare for Africa, Middle East trade -------------- -------------- At a recent function, Dr. Patrick Edwards, T&T High Commissioner-designate to Uganda, with concurrent accreditation to Kenya and Ambassador to Saudi Arabia, Egypt and Ethiopia called on the T&T business community to cultivate business opportunities in these countries. He said that one of his mandates was to establish business linkages and seek out opportunities for T&T. He also urged the business community to prepare for a plethora of opportunities in fields like transportation, entertainment and hospitality when T&T hosts both the Commonwealth Heads of Government and the Summit of the Americas in 2009. RIES