A line of Kiss bread for sale at Benefit The People supermarket in San Juan. Bread prices will increase in early January. – PHOTO BY SUREASH CHOLAI

Several leaders from various sectors of the economy believe Trinidad and Tobago will experience significant declines in 2022, as the pandemic persists and uncertainty looms.

Their comments came after the central bank released its final monetary policy announcement (MAP) for 2021 on Friday, which indicated there would be further increases in food and base inflation.

“Food inflation jumped to 7.6% from 5.8% in September and is expected to increase further given the situation on world grain markets,” he said.

The Central Bank pointed out that headline inflation in October rose to 3.9% year-on-year from 2.4% in September. Core inflation, which excluded food, doubled to 2.9% and the building materials price index rose 12.6% in the third quarter of 2021.

Economist Dr Vaalmikki Arjoon told Newsday on Sunday that rising wheat prices had triggered a chain reaction that would further worsen an already high cost of living.

Although some agri-food importers and distributors are looking for closer suppliers, such as in Latin America, Arjoon explained that supply chain issues persist due to global demand and supply parameters.

He said: “Everyone including business owners and their households will be faced with this increased cost of living due to the increase in flour prices – they will pass this higher cost on again. on consumers, which will further inflate prices, not only for the items for which flour is used to produce but also for other consumables that are used daily.

“The supply chain problems may last at least until the end of 2022, despite some increases in production at factories from Asia. Going forward, local manufacturers, especially food processors, should consider using hedging strategies to lock in specific prices from suppliers of raw materials, such as agricultural products used in the food industry, etc., thus protecting themselves from having to pay higher prices in the future if there are further price increases in the world market. At the end of 2021, major flour suppliers, National Flour Mills and Nutrimix, announced price increases, effective in early January, ranging from 10 to 22 percent. This had the ripple effect of announcements by Kiss Baking Company and Linda’s Bakery Ltd of impending price increases for its bread products.

Antoniana Clarke sources her flour from the Better Deal supermarket in Aranguez on December 29, 2021. Flour prices will be increased in early January. – PHOTO BY SUREASH CHOLAI

The price increases, Arjoon pointed out, will be made worse by shortages caused by delays at major international ports, high freight charges from China, higher black market exchange fees for importers who cannot access adequate foreign exchange from authorized dealers, higher energy prices and additional customs and port rental charges.

He said the US Federal Reserve’s decision to stop injecting liquidity through bond purchases, which would likely raise interest rates next year, may also hurt TT.

“This means that investments in the United States will provide a higher return and encourage some capital flight from TT, where several entities will invest in American securities and assets to benefit from those higher returns.

“Although the Central Bank keeps the repo rate at 3.5%, future rate hikes in the United States could at some point cause the Central Bank to raise our repo rate to prevent part of the repo rate. this capital flight, but it could also drive up interest on future commercial bank loans, making borrowing more expensive.

Supermarket Association (SATT) President Rajiv Diptee said the pandemic left the government with an element of uncertainty in planning, especially when framing an expansionary monetary policy coupled with an economic recovery. .

He said major territories such as the United States and the United Kingdom continued to experience high inflation which spilled over to smaller economies such as TT.

“The mechanism used is rising interest rates with the commonly held view that money available at higher rates means less borrowing translating into less expense, thus limiting demand and lowering prices over time. time.

“As businesses reopen and seek access to the bag of budget goodies accessible and available starting this year, it really behooves banks to work with their customers especially as many don’t tick certain boxes when they do. is about audited accounts etc. ”Diptee mentioned.

Food price inflation in a covid19 environment, he said, with the emergence of vaccine variants and reluctance, was not going to be temporary, as major food producers not only have incurred increased costs of inventory and raw materials, parts and machinery, but other factors beyond the price of inputs.

TT Chamber CEO Gabriel Faria said the economic impacts of covid19 crippled micro, small and medium enterprises (MSMEs) and the self-employed, and despite the recovery trend, a significant proportion continued to struggle.

“It is clear that the crisis is far from over. Large companies, especially the financial sector with stronger balance sheets, liquidity and assets, have been able to hold up.

“Other specific sectors, mainly food, beverage, pharmaceutical distribution and retail, actually improved their performance as consumers spent much less and focused on discretionary purchases such as essentials. and health, ”he said.

Faria stressed that continued declines or slowdown in the economy were expected for the first six months of 2022, which would be influenced by vaxx levels and workplace vaccine mandates that would create some disruption in the delivery. services, especially in the public sector.

Referring to an Inter-American Development Bank quarterly bulletin from August 2021, he said, the continued deterioration in the fiscal balance puts TT in a worse position before covid 19 and that was expected for another four years.

“In the case of Barbados and the TT, this deterioration exceeded eight percentage points of gross domestic product, and it could take years to return to pre-crisis levels. For TT, budget balances are expected to remain worse than before covid19 until 2026. This forecast could deteriorate further with recent increases in cases and deaths.

“I hope the government will take action to provide meaningful support to vulnerable people in our society, both citizens and small businesses. This could include the use of funds from the Heritage and Stabilization Fund, but there must be full transparency on how this money is used, ideally with an external body made up of civil society and government with fiscal oversight. appropriate on the use of these funds, ”Faria explained.

In addition, he called for mobilizing excess liquidity through tax incentives for investment in the MSME sector, which will provide capital and mentorship.

The finance ministry issued a statement on Friday recalling tax relief measures, several of which target technology and digitization, which came into effect on January 1. They include for SMEs a reduction in the tax rate of five percent for three years for companies whose main activity is technological solutions and digitization, as well as a tax holiday during the first period of five years for those companies. new SMEs listed on the TT stock exchange.

Measures for large companies include a five percent reduction in the tax rate for large exporters of goods for three years and a five percent reduction in the tax rate for the manufacturing sector for two years on projects. eligible.