Economic and Financial Review - June 2019

June 2019 Economic and Financial Review EXECUTIVE SUMMARY

The regional growth outlook is subject to some downside risks, given the subdued prospects for the global economy. Increasing trade tensions, uncertainties related to a decision on Brexit and on-going geopolitical pressures have the potential to adversely influence growth forecasts for the economies of the ECCU. An escalation of the trade conflict between the USA and China may result in greater uncertainty in the global environment, which may increase the possibility of investors deferring their investment plans. Additionally, the subdued rate of expansion in the USA, one of the main trading of partners of the Eastern Caribbean Currency Union (ECCU), may not augur well for the region. On the domestic side, the ECCU grapples with some critical long-term growth challenges, which have socio-economic implications. Some of the more salient medium to long-term issues include; business competitiveness, labour market inflexibility, unemployment, poverty and crime. Other significant risks are those related to climate change, global warming and natural disasters, which could potentially erase some of the gains from recent 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. Member countries have already instituted a number of corrective measures to address the more pressing short –term macroeconomic imbalances and are working with regional and international partners to address the structural impediments related to improving growth and competitiveness in the currency union. The effective implementation of these corrective measures will require more public sector operational and investment spending. On the upside, the success of initiatives to improve the closer integration of the financial sector in the currency union to facilitate better movement of capital, improve resilience and doing business environment, bode well for competitiveness in the region.

iii

Eastern Caribbean Central Bank