TT Central Bank: Higher inflation a challenge

• The Central Bank of Trinidad and Tobago warned yesterday that higher prices, particularly imported inflation, will pose a challenge to the economy in 2022. In outlining the outlook for this year in its January Economic Bulletin, the Central Bank said: 'The international shortage of shipping containers, higher shipping costs (freight and insurance) are expected to persist into the early months of 2022, alongside some pressure on prices of international agricultural commodities. The widely expected rise in interest rates in the US and other areas will also feature in the calibration of domestic monetary policy and affect the public sector debt dynamics. 
• Following the prolonged lockdown period in 2021, Trinidad and Tobago is expected to grow in 2022. Growth is expected to be fairly broad-based. On the energy front, higher natural gas production is expected, as several projects being undertaken by major players are anticipated to come on stream in the first half of 2022. 
• Full-year production in non-energy sectors will also surpass 2021 levels once there are no major reversals towards significant restrictions on mobility. At the same time, the nature of businesses will evolve in the direction of more electronic transactions and lower onsite activities, posing a challenge to the survival of some firms that are slow to adapt. 
• Higher prices, particularly imported inflation, will however pose a challenge. The international shortage of shipping containers, higher shipping costs (freight and insurance) are expected to persist into the early months of 2022, alongside some pressure on prices of international agricultural commodities. 
• Energy commodity prices are anticipated to remain relatively firm over the short to medium term. Though crude oil prices lost momentum in late 2021, demand will likely be driven by the continued increase in global economic activity. Colder temperatures during the winter months are also expected to bolster prices. Crude oil production from the Organization of Petroleum Exporting Countries and associated entities (OPEC+) is expected to increase by 400,000 barrels per day in January 2022, which should aid in closing some of the gaps between demand and supply but may exert some downward pressure on prices.

(Source: TT Central Bank)