Annual Economic and Financial Review -December 2018

2018 Annual Economic and Financial Review

EXECUTIVE SUMMARY

Citizenship by Investment Programmes. Activity on the RGSM was assessed to have improved as the value of bids on the primary market increased. Debt pressures mounted and a number of territories did not show signs of convergence to the 60.0 per cent debt to GDP ratio target by 2030. Large outlays for restoration and rehabilitation works contributed to increased borrowing. Despite issues related to correspondent banking and the implementation of the International Financial Reporting Standards 9, the banking sector remained stable with an overall improvement in asset quality and a stronger reserves position. In addition, the ECCB launched a digital currency pilot project with Bitt Inc, which is expected to address certain frictions in the financial system, improve the regional business environment and contribute to the prosperity of a striving and thriving citizenry. Short-term prospects remain positive, though relatively uneven across member countries. Compared with the outcome in 2018, all member countries are expected to register expansions in economic activity, contributing to aggregate growth in the ECCU. Policy initiatives are accommodative of a contractionary fiscal stance, as it has become imperative for the region to establish buffers to guard against adverse extrinsic shocks and strengthen resilience to natural disasters. Given the current geopolitical challenges, particularly the instability in the Venezuelan economy, it is likely that prices for petroleum products in the ECCU may rise as imports under the Petro Caribe agreements experience stoppages and countries resort to extra-regional sources. Hence, it is anticipated that inflationary pressures will linger into 2019. While the economic prospects for 2019 are largely favourable, a number of downside risks to the projections exist. These include a deeper than anticipated moderation in global growth originating from the advanced market economies, heightening of trade tensions between China and the USA and general policy uncertainty in a number of areas. Disruptions to the economies of major source markets like the USA, UK and Canada, have the potential to adversely impact tourism demand, investment flows and ultimately the overall economic outturn for the ECCU region. Other external threats include terrorism and natural disasters to which the region is

______________________________________________________________________________ ii Eastern Caribbean Central Bank