Economic and Financial Review - June 2019

June 2019 Economic and Financial Review THE COMMONWEALTH OF DOMINICA

December 2018. This development was mainly the result of an 11.8 per cent contraction in the net foreign assets position of commercial banks, associated with a decline in their net assets position with institutions external to the ECCU. A reduction of 9.1 per cent in The Commonwealth of Dominica’s imputed share of the Central Bank’s reserves also contributed to the overall decrease in net foreign assets. The commercial banking system remained liquid in the first half of 2018. The ratio of net liquid assets to total deposits fell by 2.9 percentage points to 53.0 per cent at the end of June 2019, but remained above the ECCB’s minimum benchmark of 20.0 per cent. The loans and advances to total deposits ratio increased by 2.6 percentage points to 49.4 per cent, still considerably below the ECCB’s maximum benchmark of 75.0 to 85.0 per cent. The ratio of non-performing loans to gross loans improved over the period, from 17.0 per cent to 11.8 per cent, which is 6.8 percentage points above the ECCB’s tolerable limit.

The weighted average interest rate on deposits fell by 0.05 percentage points to 1.75 per cent at the end of June 2019. Meanwhile, the weighted average interest rate on loans declined by 0.07 percentage points to 7.54 per cent. Accordingly, the interest rate spread narrowed to 5.79 per cent from 5.91 per cent at the end of December 2018. External Sector Developments Preliminary estimates indicate that the trade deficit widened by 7.0 per cent to $397.1m in the first half of 2019. This development was attributable to an increase in import payments. The value of imports rose by 10.0 per cent to $419.5m, mainly influenced by higher import of food and live animals; machinery and transport equipment and manufactured goods. However, the increase in import payments were partially offset by a more than doubling in export receipts from $10.2m to $22.4m, partially associated with a post-Maria resumption in the export of soap and paints.

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Eastern Caribbean Central Bank