Annual Economic and Financial Review -December 2018

2018 Annual Economic and Financial Review

ANGUILLA

Despite the positive growth projections for Anguilla, key downside risks persist, which could negatively impact the outlook. Chief among these is the possibility of a no-deal withdrawal of the United Kingdom from the European Union and what this may portend for critical aid to Anguilla’s capital reconstruction programme. Closely aligned is the potential effect of Brexit on the British pound, which could negatively affect the purchasing power of UK travellers. Additionally, uncertainty associated with Brexit creates concerns about the future relationship between Anguilla and St Maarten, the main access point to the island. A hard Brexit could potentially complicate access issues between the British Overseas Territory and St Maarten, which will remain a part of the European Union by virtue of being a dependent of the Netherlands. Looking further afield, a faster-than-expected slowdown in the US economy, further aggravated by a possible escalation in trade tensions between the United States of America

and China, could dampen global growth and negatively impact the demand for leisure among travellers in key source markets.

Another area of concern is the potential non- divestiture of ANGLEC shares. The use of the funds from the sale of these shares to pay off maturing debt obligations is a key component of the medium term fiscal framework and debt strategy. Non-divestiture of those shares could therefore pose liquidity issues for the central government and impair its ability to honour maturing debt obligations. Financial stability issues also continue to present some challenges for the authorities. Non-performing loans in the banking system have increased over the past year and may require additional provisioning from banks, which could negatively affect liquidity and profitability levels. Such a development could trigger further tightening in lending terms and conditions, thus making it more difficult for firms and households to access credit.

______________________________________________________________________________ 31 Eastern Caribbean Central Bank