| Trinidad and Tobago April 2008 Monetary Report - Central Bank |
SC Admin |
04/30/2008
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Banking & Finance
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Economic growth slowed in TnT
Port-of-Spain, Trinidad -- April 30, 2008 -- Since the publication of the last Monetary Policy Report in November 2007, global financial market turmoil has intensified as losses related to the sub-prime mortgage crisis unfold, exacerbating the credit crunch. The spiralling oil price to previously unexpected levels has led to a surge in the prices of other commodities, which are now serving as hedging mechanisms.
The US dollar has fallen to historic lows and this, combined with the sky-rocketing of global food prices, has raised inflation fears in both developed and developing countries.
Meanwhile, the statistical evidence that is emerging is confirming the significant slowdown in the US economy, raising the spectre that a recession is around the corner, if not here already. There are signs of a weakening in economic growth in Western Europe but most emerging and developing countries still appear to be remarkably
resilient.
Some of the highlights of the past six months have been:
• Bank losses from the sub-prime crisis are low, estimated at US$565 billion and projected to reach US$1 trillion. This crisis has led to the collapse of Bear Stearns, the world’s fifth largest investment bank, while several other major banks have had to find additional capital
to cover growing losses.
• The uncertainty created by the still unfolding crisis has curtailed inter-bank lending and is now being reflected in a generalised credit squeeze.
• The Federal Reserve has injected considerable sums and eased its lending criteria in an effort to support the financial system. Other European central banks have also provided liquidity to strengthen the financial markets. The UN has estimated that food prices have increased by 73 per cent since the beginning of 2007. The increase in food prices and looming food shortages have already provoked
social unrest in many developing countries.
• In 2007, the US dollar has depreciated by 11 per cent against the Euro and 6 per cent against the Japanese Yen. The dollar depreciation has contributed to the rise in commodity prices which are now being used as hedging mechanisms.
• Oil prices reached US$117 per barrel on April 19, 2008, compared with US$62 per barrel at the beginning of 2007.
Against this global background, the following section analyses the inflation performance in Trinidad and Tobago.
Download full report below.
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