Annual Economic and Financial Review -December 2018

2018 Annual Economic and Financial Review

EXECUTIVE SUMMARY

E X E C U T I V E S U M M A R Y

Weakened growth for some of the major economies in the latter half of 2018 punctuated somewhat the outlook for global growth in the near term. Expansion in the international economy debilitated, hence overall growth for the year was estimated at 3.6 per cent compared with growth of 3.8 per cent in 2017. According to the IMF’s World Economic Outlook (WEO) for April 2019, a deceleration is forecasted for global growth for 2019 and 2020 to 3.3 and 3.6 respectively, driven by a moderated pace of economic activity in advanced economies. Notwithstanding the deceleration, growth prospects over the near-term are relatively positive. Particularly, forecasts are for an expansion of the US economy, one of the major trading partners of the Eastern Caribbean Currency Union (ECCU) and an important source market for stay-over tourists. According to the April WEO, the US economy is expected to expand by 2.3 per cent in 2019 and 1.9 per cent in 2020. Among the key US economic indicators for 2019, the unemployment rate is projected to be 3.7 per cent and inflation 2.0 per cent. Monetary policy is not likely to tighten further from the position at December 2018, when the funds rate was raised to 2.5 percent. Against the backdrop of these anticipated developments in the global economy, economic activity in the ECCU in 2019 is expected to continue with growth in all member countries. The expansion in 2018 were largely driven by construction and tourism activity, supported by the auxiliary sectors, which will all contribute to the impetus for growth in 2019. Though moderate, inflationary conditions prevailed as prices for petroleum products and food remained elevated. The merchandise trade balance for the region deteriorated influenced by higher levels of imports, mainly of construction materials to sustain the activity in that sector. On a consolidated basis, the overall fiscal situation improved, turning around to register a surplus. This outcome was the result of an expansion in the current account surplus, as revenue collections surpassed current outlays. The buoyancy in revenue was mainly associated with stronger inflows from the

______________________________________________________________________________ i Eastern Caribbean Central Bank