Economic and Financial Review - June 2019

June 2019 Economic and Financial Review SAINT VINCENT AND THE GRENADINES

be hard pressed to increase capital investment in the existing environment. Notably, one of the most significant risks for small island states such as Saint Vincent and the Grenadines is the effect of climate change and the impact of extreme climatic events. The initial outlook was for a less active hurricane season in 2019, however, more recent developments indicate that the country remains susceptible to natural disasters, in the form of hurricanes, floods and earthquakes which could pose social and economic costs for the island. Upside risks for Saint Vincent and the Grenadines include an expanding global economy and buoyancy in the major trading partners. Additionally, no significant movement is expected in the real exchange rate of the EC dollar as inflationary outcomes in the ECCU are not projected to

deviate much from that of its major trading partners. Therefore, from a price competitiveness standpoint, exchange rates movements are not forecasted to materially impact Saint Vincent and the Grenadines. On the domestic front, the passing of legislation aimed at the establishment of a medical Cannabis industry could further diversify the agricultural sector and boost the country’s foreign exchange earning capacity. The prospects of greater investment in the Cannabis industry could generate a host of spin-off industries, which will likely have positive implications for the labour market and growth. The development of new economic sectors increases the country’s resilience to economic shocks and creates synergies with other more established sectors such as the tourism industry and manufacturing.

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Eastern Caribbean Central Bank