Economic and Financial Review - June 2019

June 2019 Economic and Financial Review EXECUTIVE SUMMARY

quarterly basis in the second quarter, its first contraction since 2012. Despite this contraction, the number of stay-over visitors from the UK expanded by 10.6 per cent. The increase in stay- over arrivals from the UK was partially buoyed by healthy labour market conditions, as the UK unemployment rate stood at 3.9 per cent in the second quarter compared with the 44-year low of 3.8 per cent registered in the previous quarter. During the period, wages also rose at the fastest pace in 11 years, and may have contributed to the increase in stay-over arrivals. Despite the slowing global economy, provisional estimates of selected indicators for the first half of 2019 indicate that economic activity at the ECCU level improved, relative to the outturn in the corresponding period of 2018. Growth was geographically broad-based, with expansions in all member countries. The improvement was driven by higher levels of activity in the tourism industry and construction sector, supported by ancillary sectors. With respect to price developments, inflationary pressures remained muted at the ECCU level in spite of a marginal increase in consumer prices in a number of member countries. The consolidated balances of the central governments deteriorated to an overall fiscal deficit, in contrast to a surplus recorded in the corresponding period of the prior year. The outstanding debt stock of the public sector expanded during the period under review. The merchandise trade deficit is estimated to have narrowed, primarily due to lower import payments. The banking system remained adequately capitalized, with improved asset quality, despite a relatively tight liquidity environment. Near-term forecasts for economic activity at the ECCU level remain generally favourable. The regional economy is projected to expand in 2019 and remain on a positive growth trajectory into 2020, albeit with uneven growth across countries. The improvement in economic performance of the currency union is likely to be driven by anticipated expansion and renovation of a number of major hotels, construction and other ancillary sectors. The construction sector is also likely to be boosted by public sector infrastructural initiatives in several member territories. Inflows from the Citizenship by Investment Programmes are expected to persist and help to sustain the growth momentum.

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Eastern Caribbean Central Bank