Economic and Financial Review - June 2019

June 2019 Economic and Financial Review DOMESTIC ECONOMIC DEVELOPMENTS

to strengthen in 2019. Although uneven across member countries, the expected positive developments in all eight territories will redound to an acceleration in the pace of growth in the ECCU. Aside from the anticipated impetus from a number of key economic sectors, support for the economy is likely through augmented inflows from the Citizenship by Investment Programmes, coupled with policy initiatives to boost activity in order to achieve the 5.0 per cent growth target. Inflationary pressures may be contained for the remainder of the year, on the assumption that global demand remains soft and geopolitical tensions in the Middle East do not escalate. The consolidated fiscal balance of the central governments is likely to deteriorate in the latter part of 2019, attributable to expectations for increased spending. Concomitant with a slight deterioration in the fiscal situation, total indebtedness is likely to increase as governments may borrow for financing capital projects. The merchandise trade deficit may expand, owing to the anticipated increase in imports, which is likely to offset any gains on the export side.

The ECCU continues to be challenged by structural and other constraints to growth and competitiveness. Although efforts are on-going to address these challenges, the social costs continue to rise. Other risks include the adverse effects of global warming and climate change, which brings with it more powerful storms that cause substantial damage to agricultural crops, the housing stock and vital infrastructure in the ECCU. The region must closely monitor the on-going geo-political tension and the tariff war between the USA and China. Social ills like increasing rates of crime, unemployment and poverty can also affect business activity and competitiveness. Real Sector Developments An assessment of preliminary selected real sector data, point to the tourism industry as one of the main drivers of economic activity in the review period, supported by other key sectors, including construction. Tourism- related activity expanded in the first half of 2019, relative to the comparable period of 2018. Total visitor arrivals rose by 8.2 per cent to approximately 3.0m, compared with growth of 4.2 per cent in the corresponding period last year.

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Eastern Caribbean Central Bank