2014 Financial Stability Report
Central Bank
Download Document| Date Published | 2014 |
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| Theme | Legal Framework for Housing Finance , Regulation and Supervision of Housing Finance Systems |
| Country | Trinidad and Tobago |
Abstract
The global economic recovery was weak and uneven in 2014 and is anticipated to be subdued in 2015. Among the major advanced economies, the recovery in the United States has been stronger than expected, prompting the start of a gradual withdrawal of the extraordinary monetary stimulus put in place by the US Fed over the past half a decade or so. In contrast, recovery in nearly all other advanced economies has been slow, suggesting further policy stimulus may have to be deployed to reduce the overall drag on global growth. A number of important downside risks to the global economic outlook remain. There are concerns about stagnation and low inflation in the Euro Area as well as in Japan. Some major emerging markets, which supported global activity in the recent past, are losing momentum with spillovers to regional economies. China’s slowdown is likely to affect much of emerging Asia. Russia’s steep contraction is diminishing economic prospects for the rest of countries in the Commonwealth of Independent States (CIS) group. Mounting geopolitical tensions in Greece, Ukraine and the Middle East also loom. The sharp plunge in crude oil prices since September 2014, should it extend to natural gas and persist for a longer time, is likely to provide some boost to global growth but will weaken fiscal and external positions for Trinidad and Tobago and other energy-producing countries. Global growth prospects continue to be highly dependent on exceptional and prolonged monetary stimulus in many advanced economies. This monetary stimulus has pushed down long-term interest rates to near historical lows, fuelling investors’ risk appetite and a search for higher-yielding assets. The search for yield rallied stock markets, narrowed credit spreads on high-risk corporate bonds, revived segments of the structured finance markets and pushed leverage loan markets to unprecedented levels. More recently, the US dollar has begun what seems to be a trend appreciation against the euro and yen and currencies of many emerging markets have weakened, especially those of commodity exporters.