Interview: Karen Darbasie
To what extent do you expect Trinidad and Tobago’s economy to stabilise in 2018?
KAREN DARBASIE: After two years of pronounced decreases in GDP, with contractions as high as 6% in 2016 and 3% in 2017, most indicators are showing that 2018 will be the year of economic recovery. The IMF has forecast 1.9% GDP growth in 2018. This has led the banking sector, which always tracks macroeconomic data extremely closely, to be both cautious and optimistic regarding fortunes for the year ahead.
Increased overall investment in production in the energy sector, coupled with a perceptible rise in oil and gas prices, in addition to 2018 marking the first year of both the Juniper and Angostura facilities in full production, gives us good reason to believe that after a series of years in recession, 2018 will offer good news for the economy in general.
How can the foreign exchange (forex) shortages T&T has experienced recently be addressed?
DARBASIE: The energy sector was traditionally the country’s largest supplier of forex reserves. Once hard currency revenue from the industry notably decreased, due to a reduction in both international energy prices and production, there was an immediate repercussion in the amount of forex circulating in T&T. This was even more apparent because next to the energy sector, there is a large import-export industry in the country that nominally consumes a significant share of the foreign currency brought into the system via the oil and gas sector.
Although domestic banks hold an important share of total deposits in forex, since they are deposits, they cannot be traded on the market without putting savers at risk. In the case of forex, one of the principal solutions, which was adopted by the central bank, was to step up and supplement foreign currency levels in the economy after the fall in revenue from the energy sector. Increased production and profits from the oil and gas sector, as forecast, should bring a short-term alleviation of the problem up to mid-2018.
How can banks better support entrepreneurs and small and medium-sized enterprises (SMEs) in expanding their business in T&T?
DARBASIE: Traditionally, Trinbagonian banks have regarded themselves as collateral-lending institutions. This is an obstacle for SMEs and small entrepreneurs, who do not possess significant fixed assets to use as collateral. However, it is important to underline that banks are not venture capital institutions. Perhaps the most useful form of entrepreneurial and SME ecosystem support that banks can provide is that of an increase in financial education. Banks and other financial institutions are ready to partner in facilitating credit and promoting financial education in this regard among SMEs and entrepreneurs.
What impact is the rise of cryptocurrencies having on regional financial services?
DARBASIE: Mobile banking and cryptocurrencies, especially blockchain technologies, will certainly be a disruptive force, yet how this disruption will occur remains unknown. Banking and financial institutions in general have some concerns about cryptocurrencies. Virtual currencies can be used fraudulently in money laundering and terrorism activities. Additionally, a number of cryptocurrency buyers in the region carry out transactions believing that they will ease the transfer and conversion of local currencies into foreign ones, which is simply not the case at present.
More importantly, the uncontrolled emission of a means of payment will mean the ability to use monetary measures to support fiscal initiatives will be considerably limited in the medium to long term. Banks have a long history and have survived many instances of disruptive technology. We are sure they will continue to have an important role going forward.
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