Economic and Financial Review - June 2019

June 2019 Economic and Financial Review SAINT LUCIA

($22.5m), mainly influenced by flows for house and land purchases ($19.4m), home construction and renovation ($5.2m) and durable consumer goods ($3.3m). The net foreign assets of the banking system rose by 25.8 per cent to $1,048.5m over the first half of 2019, following an increase of 37.8 per cent to $833.3m over the comparable period of 2018. This change was largely influenced by the 30.4 per cent ($188.5m) reduction in commercial banks’ external liabilities, coupled with a 1.6 per cent ($20.3m) increase in external assets. In respect of developments within the ECCU, commercial banks’ net liabilities position increased marginally by 0.2 per cent ($1.1m) as both assets and liabilities recorded contractions of similar magnitudes. Saint Lucia’s imputed share of Central Bank’s reserves increased by 1.0 per cent ($7.5m) to $749.6m. Liquidity in the commercial banking system declined marginally during the review period. At the end of June 2019, the ratio of liquid assets to total deposits plus liquid liabilities stood at 42.8 per cent, 1.4 percentage points below the level recorded in December 2018, but above the prudential minimum of 25.0 per cent.

Furthermore, the loans and advances to total deposits ratio fell by 3.5 percentage points to 77.2 per cent, also below the ECCB’s outer band of 85.0 per cent. In addition to maintaining satisfactory levels of liquidity, the asset quality of commercial banks improved over the review period, with the nonperforming loans (NPL) ratio declining to 8.8 per cent from 10.0 per cent in December 2018. This development was further supported by the capital positions of commercial banks, with the capital adequacy ratio improving to 20.3 per cent as at June 2019, from 19.1 per cent in December 2018. The weighted average interest rate spread between loans and deposits declined marginally by 0.3 of a percentage point to 6.2 per cent, compared with a spread of 6.5 per cent as at December 2018. The reduction in the spread was mainly attributable to a larger decline in the weighted average lending rate (0.3 of a percentage point) than that of the weighted average deposit rate (0.04 of a percentage point).

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Eastern Caribbean Central Bank