Economic and Financial Review - June 2019

June 2019 Economic and Financial Review EXECUTIVE SUMMARY

could build up; nonetheless real exchange rate pressures are not anticipated.

the prior year. While an expansion in expenditure is anticipated, a substantial increase in revenue is not expected; hence, a slight deterioration in the overall balance is anticipated. Furthermore, capital expenditure could potentially rise as pertinent infrastructural rehabilitation projects progress in most member countries. Concomitant with the forecasted fiscal position and overall economic activity, the total indebtedness of the currency union is likely to edge up as some member governments borrow to finance their budget shortfalls. However, a better than anticipated performance in non-tax revenue and an increase in inflows of grants, may have a positive impact on the fiscal situation. accommodating higher import payments, particularly that of construction and other related materials. On the other hand, barring damage from adverse weather, agricultural production may continue to recover, encouraging exports of banana and other crops. Gross travel receipts may increase, consistent with a forecasted boost in the tourism industry. Pressures on commodity prices may be likely in the near- term as geopolitical tension persists in oil- exporting countries, inflationary pressures In the external sector, the merchandise trade deficit is projected to widen,

The increasing trade tensions between the USA and China, the uncertainties related to a decision on Brexit and on-going geopolitical pressures to the global economic outlook have the potential to adversely influence growth forecasts for the economies of the ECCU, given their openness. Moreover, the ECCU grapples with domestic challenges, with socio- economic implications, which can drain fiscal resources. These include business competitiveness, labour market impediments, unemployment, poverty and crime. Other significant risks are those related to climate change, global warming and natural disasters - including an active hurricane season, which could potentially erase some of the gains on infrastructural rehabilitation. In addition, a slow-down in inflows from the Citizenship by Investment Programmes and further challenges with de- risking and correspondent banking relationships could affect business continuity. On the upside, the success of initiatives to improve effectiveness and efficiencies in the banking service infrastructure to facilitate business activity bode well for competitiveness in the region.

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Eastern Caribbean Central Bank