Economic and Financial Review - June 2019

June 2019 Economic and Financial Review ANGUILLA

are anticipated to mirror that shown in the first half of the year, especially in the fourth quarter. In addition, support is expected from the Anguilla Programme, funded by the UK government, as schools and other critical infrastructure undergo restoration. Given the continued prudent use of resources, the government of Anguilla is projected to generate surpluses on both the primary and overall balances in 2019. On the external front, the merchandise trade deficit is expected to widen, as activity in the tourism industry solidifies and the pace of public sector construction activity quickens. As a result, the import of essential inputs and supplies is anticipated to increase commensurately. Additionally, gross inflows from travel are projected to increase in 2019, largely attributable to the significant growth in visitor arrivals. Major downside risks to the economy include the further escalation of trade tensions between the two largest economies in the world, the USA and China. Such an eventuality threatens to derail global growth through the disruption of trade and technology supply chains, leading to higher prices for consumers and greater uncertainty among investors. In addition, uncertainty

associated with Brexit continue to weigh on the global economy and could potentially dampen demand for Anguilla’s tourism services from this source market. Moreover, geopolitical tensions in the Middle East could escalate and threaten to exert upward pressure on global oil prices. On the domestic front, a reduction in funds allocated to the Anguilla Programme by the UK government, in support of the reconstruction of vital infrastructure, could slow the pace of recovery and the provision of vital services to the broader economy. The prospect of higher oil prices could also result in rising inflationary pressure on the domestic economy, further increasing the cost of doing business in Anguilla. Despite these downside risks, possible upside surprises may emerge from stronger global growth, should a resolution be reached in the trade dispute between the USA and China. Additionally, given the global crude oil market is currently adequately supplied, a stabilisation of geopolitical tensions in the Middle East could exert downward pressure on oil prices, thereby reducing the cost of travel and lending support to the demand for tourism services.

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Eastern Caribbean Central Bank