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

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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.


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