Economic and Financial Review - June 2019

June 2019 Economic and Financial Review SAINT CHRISTOPHER (ST KITTS) AND NEVIS

and Maria in the latter part of 2017. Crop production however continues to be affected by water shortages and pests. Disease in the livestock subsector is however anticipated to temper the sector’s performance. The fiscal surplus on the government’s account is likely to be sustained, owing to continued inflows of citizenship by investment receipts and the overall buoyant economic activity. The surplus is however anticipated to be moderated by some increase in capital spending, as work on major capital projects continue. In the external sector, the narrowing of the merchandise trade deficit is expected to decelerate, as imports climb, particularly as the holiday season approaches. Additionally, the real exchange rate of the EC dollar is expected to remain stable, as inflationary outcomes in the ECCU are projected to move in line with that of its major trading partners. Thus the Federation is not expected to be adversely affected by fluctuations in the real exchange rate, which bodes well for competitiveness. Risks to this outlook are skewed to the downside. Domestically, a deceleration in inflows from the Citizenship by Investment Programme, could result in the stymie of

tourism-related foreign investment and a decline in the rate of implementation of the government’s capital programme. Additionally, Saint Christopher (St. Kitts) and Nevis remains vulnerable to both exogenous macroeconomic and natural disaster shocks. Escalating trade tensions between the USA and China and stalled Brexit negotiations, remain a source of global uncertainty. These developments could weigh negatively on consumers’ and investors sentiment’ and consequently global growth. Subdued global growth will have negative spill over effects, albeit with a lag, on the economy of Saint Christopher (St. Kitts) and Nevis, especially through reduced demand for tourism services, the main foreign exchange earner. Furthermore, adverse weather also remains a significant threat to economic activity in the federation. On the upside, the advancement of capital projects should result in infrastructural improvements across the federation. Moreover, persistent fiscal surpluses are likely to maintain debt at sustainable levels and create some space for counter cyclical spending if required. Finally, if the ongoing efforts to address crime in the federation continue to be successful, it could further enhance social conditions and the doing business environment.

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Eastern Caribbean Central Bank