Economic and Financial Review - June 2019

June 2019 Economic and Financial Review SAINT VINCENT AND THE GRENADINES

observed in the first half of 2019. These developments however, may be tempered by institutional and constraints which will limit the level of capital investment . Notwithstanding the expenditure constraints, total outlays is projected to increase in 2019, driven by higher allocations for health and hospital services associated with the commissioning of three new health facilities; as well increased police and security-related services. A salary increase granted to teachers in the first half of 2019 and the recruitment of more qualified teachers are all anticipated to contribute to higher expenditure and a widening of the overall deficit. This generally optimistic outlook for economic growth should however be tempered by a few downside risks. In the international context, the global economic expansion continues to decelerate as a number of advanced economies approach the end of the expansionary phase of the business cycle. These developments are further compounded by an uptick in geopolitical tensions stoked by the escalating trade war between the USA and China. The ongoing dispute between these major economies has curtailed global trade and created further uncertainty about the

sustainability of the current rate of global growth. More recent geopolitical events, particularly the attack on the Saudi Arabian oil facilities, may trigger protracted increases in oil prices if the tensions persist. These developments could further dampen global growth. Consequently on the domestic front, the optimistic outlook for stayover arrivals from the ongoing operations of the international airport, may fail to be realized if global growth continues on its slower growth trajectory. Growing uncertainty about global trade and trade tensions between the USA and China, compounded with Brexit concerns in the UK and its trade partners threaten to derail the recent successes in developing these major source markets. The high cost of interregional travel continues to be a major impediment to the development of a regional tourism market, a major contributor to stayovers in Saint Vincent and the Grenadines. Other downside risks relate to the continued low implementation rate of infrastructural projects and the adverse impact on growth. This is compounded further by the constraints placed on the budget associated with the widening overall fiscal deficit and the less favourable external lending environment. The authorities will

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Eastern Caribbean Central Bank