2020 Annual Economic and Financial Review

2020 Annual Economic and Financial Review

DOMESTIC ECONOMIC DEVELOPMENTS

short term discount rate to 2.0 per cent from 6.5 per cent and the long term discount rate to 3.5 per cent. The ECCB also provided regulatory forbearance to the ECCU Bankers’ Association in support of the extension of a range of banking sector measures to support customers. Banking sector measures included a loan repayment moratorium for an initial period of six months and the waiver of late fees and charges. In September 2020, the ECCU Bankers’ Association extended the current moratorium to as much as twelve months, where required. These measures helped to mitigate the adverse impact of the pandemic on borrowers and on the banking sector.

uncertainty generated by the pandemic. M2 declined by 8.7 per cent to $16,585.9m (94.7 per cent GDP) during 2020, after having expanded by 2.3 per cent to $18,163.3m (114.3 per cent of GDP) during the previous year. Notably, declines in both foreign currency deposits (17.4 per cent) and other EC currency deposits (5.5 per cent) contributed to the downward trend in the monetary aggregate. These declines were tempered by an increase of 2.3 per cent in currency in circulation. Net foreign assets of the ECCU’s banking system rose by a further 6.1 per cent to $9,738.7m (55.6 per cent of GDP), following an increase of 4.8 per cent in 2019. The robust growth was attributed to a 16.6 per cent decline in liabilities to non- residents. Meanwhile, domestic claims (credit) rose by 4.6 per cent to $10,741.8m, following growth of 3.1 per cent in the previous year. The rise in domestic claims was due to expansions in claims on governments and private sector of 27.8 per cent and 3.4 per cent respectively. Advances in business credit (3.9 per cent) and household credit (3.3 per cent) both contributed to the increase in private sector claims.

ECCU Monetary Aggregates Annual Percentage Change

6.0

16.0

4.0

14.0

2.0

12.0

0.0

10.0

(2.0)

8.0

(4.0)

6.0

(6.0)

(Money & Credit)

(Net Foreign Assets)

4.0

(8.0)

2.0

(10.0)

(12.0)

0.0

2016

2017

2018

2019

2020

Credit

Money

Net Foreign Assets

Broad money liabilities (M2), which comprised currency in circulation and deposits, declined amid the lower economic activity, significant job losses and

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