Global Prospects and recovery of Trinidad and Tobago Anthony Birchwood (PHD) Caribbean Centre for Money and Finance The University of the West Indies. Presented at AREA, May 16 th 2012
Global Prospects for 2012 Global economy is showing gradual recovery. Developed economies recovering faster than emerging and developing countries. Recovery assisted by strengthening of consumption. Softening of activity in developing countries. Global Recovery hampered by crises in the EURO area. Recovery clouded by uncertainty Weak financial markets and loss in investment confidence.
Boost to Growth Strong Industrial Production in Asia Strong growth in Emerging Market. Emerging economies projected to expand between 5.5 6 %. Recovery of Commodity Prices.
Drag on Global Economy Fiscal consolidation and debt crises facing EU. Market uncertainties persist. Slow Growth of Global Economies.
Findings of CCMF report. Growth in the region averaged 2.2% for 2011. Weakened labour markets. Credit conditions improved in most regional economies
Findings of CCMF Report (Continued) Unsatisfactory loan delinquency and high levels of liquidity. Most regional economies recorded growth in trade for 2011over 2010. Improved performances in Tourism. Strong showing in minerals and fuels. Fortunes of manufacturing sector was mixed.
Real Estate Mortgage Market Real estate lending remained strong. Up to September 2011 it increased by 10.5% compared to 8.2% in September of the previous year. The strengthening of mortgage lending was buttressed by falling mortgage rates. Mortgage rates fell to 6.5% in Sept 2011 compared to7.1% in 2010. Commercial Mortgage rates fell to 7.9% from 8.5% in the previous year. Activity was concentrated in the residential sector rather than the commercial sub sector.
Factors expected to impact on forecast Recovery of Real estate prices strongly depends on the recovery of the TT economy. Recovery of the TT economy is dependent on the pace of recovery of the US economy energy demand consumer demand.
Crude Oil Prices 120 Price 115 110 105 100 Price 95 90 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12
Food and Beverage Price 200 195 190 185 180 175 170 165 160 155 150 145 Food Price
Growth Cycles Trinidad and Tobago recovery is expected to be slower than the global and Latin America. Trinidad and Tobago growth cycles amplifies the US. Recovery of TT is impacted by the length of the financial crises and the size of recovery.
Growth Cycles (Continued) Low growth forecasted for the global economy. Slow pace of recovery forecasted for the US economy. Recovery of TT is expected to be low.
Comparative Growth of TT Economy TT Growth amplify US 4 3 2 1 0-1 -2-3 -4 3 2.4 2.1 1.7 1.7 0 2009 2010 2011 2012 2013-1.3-3.3-3.5 Trinidad and Tobago USA
Hemispheric growth 2011 2012 Advanced Economies 3.9 3.5 Emerging and Developing Economies Latin America and the Caribbean 6.2 5.7 4.5 3.7 Trinidad and Tobago -1.3 1.7
Uncertainty concerning TT growth as Global growth projected to slow, But Commodity prices are forecasted to remain strong. Therefore TT should benefit from favourable terms of trade. Favourable TOT can drive investment. In light of slow recovery of the US, the recovery of the TT economy may be gradual.
Forecasted demand in real estate market Downturn in energy prices can derail the recovery of the TT economy. Slow pace of recovery of the US economy can set back TT recovery. Slow Recovery of US Economy can dampen recovery of real estate prices and domestic demand in the real estate market.
Substitution of savings into real estate At the high end of the market, persons may hedge their savings in real estate. Negative savings benefit the real estate market. Low inflation rate. 5.3% in December. Food Inflation 10.9%. Fall in interest rates. Mortgage loans continue to grow by 9.7% on a year on year basis for 2011.
Conclusion Recovery of TT expected to be gradual as global recovery is expected to be gradual. Growth of real estate sector would not be uniform. Different speeds of recovery according to market segment. Recovery stronger at high end of residential market owing to speculation.