June 2020 Economic and Financial Review

1

E A S T E R N C A R I B B E A N C E N T R A L B A N K

ADDRESS

Headquarters :

P O Box 89

Basseterre

St Kitts and Nevis

West Indies

(869) 465-2537

Telephone:

(869) 465-5615

Facsimile:

rd-sec@eccb-centralbank.org

Email:

www.eccb-centralbank.org

Website:

The ECCB welcomes your questions and comments on this publication.

2

June 2020 Economic and Financial Review

COUNTRY ECONOMISTS UNIT

RESEARCH DEPARTMENT

The Eastern Caribbean Central Bank prepares an Economic and Financial Review for the Eastern Caribbean Currency Union and each individual member territory for the periods ending June and December of each year.

Acting Director Ms Patricia Welsh

Administrative Editors Ms Patricia Welsh Mrs Beverley Labadie

Contributors Senior Economists

Correspondence regarding the June 2020 Economic and Financial Review should be addressed to:

Ms Beverly Lugay (Acting) Mr Leon Bullen (Acting) Ms Martina Regis (Acting)

The Director Research Department Eastern Caribbean Central Bank P O Box 89 BASSETERRE St Kitts

Economists II Mr Kevin Woods

Economists I Ms Rochelle Harris Mr Peter Abraham Jr

Tel: (869) 465 2537 Fax: (869) 465 5615 Email: rd-sec@eccb-centralbank.org Website: http://www.eccb-centralbank.org/

Statistics Department

Administrative Officer Ms Sheena Gonsalves

Cover Design Rochelle Harris Beverly Lugay

The June 2020 Economic and Financial Review is a publication of the Eastern Caribbean Central Bank

Photo Credit Anguilla – Sharmaine Francois Antigua and Barbuda – Rochelle Harris Commonwealth of Dominica – Chad Ambo Grenada – David Bullen Montserrat – Keri Matthew St Kitts and Nevis – Peter Abraham Jr Saint Lucia – Benjamin Howell Saint Vincent and the Grenadines – Rochelle Harris

3

CONTENTS

ECONOMIC REVIEW:

DOMESTIC ECONOMIC DEVELOPMENTS ...................................................................................6

COUNTRY PERFORMANCES:

ANGUILLA..........................................................................................................................................14

ANTIGUA AND BARBUDA...............................................................................................................18

THE COMMONWEALTH OF DOMINICA ......................................................................................24

GRENADA...........................................................................................................................................29

MONTSERRAT ...................................................................................................................................34

SAINT CHRISTOPHER (ST KITTS) AND NEVIS ............................................................................39

SAINT LUCIA .....................................................................................................................................44

SAINT VINCENT AND THE GRENADINES....................................................................................49

NOTES FOR STATISTICAL TABLES AND MONETARY SURVEY ...............................................54

S T A T I S T I C A L T A B L E S I N D E X ..................................................................................56

4

L I S T O F A C R O N Y M S A N D A B B R E V I A T I O N S

ABST - Antigua and Barbuda Sales Tax

CBI/CIP - Citizenship by Investment

CPI - Consumer Price Index

ECCB -

Eastern Caribbean Central Bank

ECCU

-

Eastern Caribbean Currency Union

EU - European Union

FDI -

Foreign Direct Investment

GDP -

Gross Domestic Product

M2 -

Total Monetary Liabilities (Currency with the Public plus Deposits)

NFA -

Net Foreign Assets

NFPE - Non-Financial Public Enterprises

NPL - Non-performing Loans

UK

- United Kingdom

US/USA - United States of America

WEO - World Economic Outlook

5

June 2020 Economic and Financial Review DOMESTIC EONOMIC DEVELOPMENTS

DOMESTIC ECONOMIC DEVELOPMENTS

Overview

The

Triggered by the crisis from the COVID-

evolution of the pandemic.

uncertainty stems from a weak recovery of

19 pandemic, provisional estimates point

the tourism industry, a possible resurgence

to a contraction in economic activity at the

in infections globally, anticipated delays in

ECCU level for the first half of 2020,

the development of a vaccine and the

relative to the outturn in the

probable impact from natural disasters,

corresponding period of 2019 . This

particularly hurricanes.

decline reflected contractions in the major

sectors in all member countries, particularly

Real Sector Developments

in tourism and its ancillary sectors, as

Against a background of extensive

countries implemented stringent measures to

lockdowns and travel restrictions introduced

curb the transmission of the virus.

by both advanced and emerging economies,

economic activity in the ECCU is estimated

Notwithstanding the gradual reopening of

to have declined in the first half of 2020.

economies regionally and globally , the

Available data suggest that tourism-related

outlook for growth in the ECCU for the

activity fell, given the disruptive effects of

remainder of 2020 is subdued and

the COVID-19 pandemic. The total number

exceptionally uncertain in light of the

6

June 2020 Economic and Financial Review DOMESTIC EONOMIC DEVELOPMENTS

of visitors to the currency union is estimated

Activity in the construction sector is

to have plummeted by 45.8 per cent to

provisionally estimated to have weakened in

1,608.9m, as all member countries were

most member countries. This weakening

affected.

was partially mitigated by ongoing public

sector construction activity in Anguilla,

Stay-over visitor arrivals fell precipitously

St Christopher (St Kitts) and Nevis and

by 54.3 per cent to 313,373, reflecting

Saint Vincent and the Grenadines.

declines in arrivals from all major source

markets, necessitating the temporary closure

The agriculture sector experienced knock-on

of most hotels. All eight countries

effects from the decline in tourism, though

experienced contractions in stay-over

the impact was slightly muted. In response

arrivals ranging from 47.8 per cent in

to likely international supply chain

Antigua and Barbuda to 55.5 per cent in

disruptions, governments implemented

Anguilla. The number of excursionists,

initiatives aimed at improving domestic food

yacht passengers and cruise ship visitors fell

production and enhancing food security.

by 60.0 per cent, 43.0 per cent, and 42.8 per

These include a land distribution programme

cent, respectively. Adverse impacts were

to 50 farmers in Antigua and Barbuda and

noted for ancillary sectors including

the distribution of seedlings in

transport, storage and communications,

Saint Kitts and Nevis. Despite a decline in

wholesale and retail, as well as real estate

banana production, exports grew by

renting, and business activities due to travel

3.8 per cent in the first half of 2020, giving

restrictions and the imposition of physical

rise to a 12.2 per cent increase, to $8.6m,

distancing and stay-at-home orders.

in revenue from exports of bananas.

ECCU Visitor Arrivals

Thousands

1,000.0 1,200.0 1,400.0 1,600.0 1,800.0

0.0 200.0 400.0 600.0 800.0

18 Q1 18 Q2 18 Q3 18 Q4 19 Q1 19 Q2 19 Q3 19 Q4 20 Q1 20 Q2

Stay-overs Cruise Ship Passengers

Yacht Passengers Excursionists

7

June 2020 Economic and Financial Review DOMESTIC EONOMIC DEVELOPMENTS

Fiscal Developments

ECCU Exports of Bananas

'000 Tonnes/ EC$M

Preliminary data on the aggregated fiscal

7.0

6.0

operations of the central governments

5.0

4.0

indicate that an overall deficit of $290.1m

3.0

was generated, in contrast to a surplus of

2.0

1.0

$1.7m recorded in the prior year. The

0.0

18 Q1 18 Q2 18 Q3 18 Q4 19 Q1 19 Q2 19 Q3 19 Q4 20 Q1 20 Q2

primary balance yielded a deficit of $63.8m

Volume Value

in contrast to a surplus of $243.8m in the

previous year. This dramatic reversal was

Prices

largely attributed to a deterioration in

Amid the synchronized decline in global

current revenue and masks important

economic activity and falling crude oil

differences across member countries.

prices, the ECCU experienced deflationary

Deficits were registered in all member

conditions. Consumer prices retreated by

countries with the exception of Grenada,

2.8 per cent in the first half of 2020,

where a marginal surplus was observed.

following a marginal growth of 0.2 per cent

Antigua and Barbuda and Commonwealth of

in the corresponding period one year earlier.

Dominica realized smaller deficits, while

The fall in the index reflected declines

larger deficits were observed in

across all member countries and across most

Saint Vincent and the Grenadines and

of the sub-indices, particularly the

Montserrat.

Saint

Lucia,

petroleum-based components. The declines

St Christopher (St Kitts) and Nevis and

in price levels ranged from 0.2 per cent in

Anguilla yielded deficits after recording

Antigua and Barbuda to 2.1 per cent in

surpluses in the preceding year.

Saint Lucia.

8

June 2020 Economic and Financial Review DOMESTIC EONOMIC DEVELOPMENTS

The aggregated fiscal operations of member

(0.8 per cent) to $2,438.8m relative to an

governments yielded a current account

8.9 per cent increase in the prior year.

deficit of $156.4m in contrast to a surplus of

These declines were observed in Antigua

$370.4m one year earlier. Undermined by

and Barbuda (9.3 per cent), Anguilla

global travel restrictions, extensive

(13.0

per

cent)

and

Dominica

lockdowns and commercial disruptions in

(13.7 per cent), which instituted less

several member countries, current revenue

extensive stimulus measures. Conversely,

slumped by 19.3 per cent to $2,282.4m. The

current expenditure rose in the remaining

fall in revenue was due to lower inflows

five countries, as a number of these

from all of the major tax categories,

governments provided extraordinary support

including taxes on property (25.5 per cent),

to mitigate the economic impact of the

on international trade and transactions

pandemic through investments in the health

(16.5 per cent) on domestic goods and

sector and the introduction of stimulus

services (14.8 per cent) and on income and

measures for social protection. With the

profits (15.9 per cent). The deterioration in

exception of St Kitts and Nevis and

current revenue was also driven by a sharp

Anguilla, all member governments recorded

fall (30.2 per cent) in receipts from non-tax

lower outlays in interest payments, as they

revenue, precipitated by lower inflows from

benefitted

from

loan

repayment

the Citizenship by Investment Programmes.

moratoriums from selected creditors.

Due to the rigorous containment measures

ECCU Public Finance

EC$M

-400.0 -200.0 0.0 200.0 400.0 600.0 800.0 1000.0 1200.0 1400.0 1600.0 1800.0

and heightened uncertainty, capital

expenditure at the ECCU level declined by

36.8 per cent to $316.3m, following a

0.1 per cent fall in 2019. Contractions in

capital outlays were noted in four countries:

18 Q1 18 Q2 18 Q3 18 Q4 19 Q1 19 Q2 19 Q3 19 Q4 20 Q1 20 Q2

Commonwealth of Dominica ($171.3m),

Recurrent Revenue Recurrent Expenditure Current Account Balance

Saint Lucia ($30.2m) St Kitts and Nevis

($7.8m) and Antigua and Barbuda ($1.5m).

Reflecting the differentiated responses by

Total grant inflows rose by 40.0 per cent to

member governments to the crisis, total

current expenditure declined marginally

9

June 2020 Economic and Financial Review DOMESTIC EONOMIC DEVELOPMENTS

$175.2m, reflecting higher inflows in all

currency in use and bank deposits, amid

countries, except Saint Lucia.

significant job losses and uncertainty.

Declines were registered in foreign currency

deposits (19.8 per cent) and currency in

Banking Sector Developments

circulation (7.5 per cent) contributed to the

As the crisis began to take effect in ECCU

downward trend in narrow money.

member countries, the ECCB responded

with unprecedented actions to support

The net foreign assets of the ECCU’s

economic and financial stabilization.

banking system rose by 9.9 per cent to

These included the expansion of credit

$10,092.8m, primarily attributed to the

extended to governments, lowering the

combined effects of an 11.7 per cent decline

discount rate to 2.0 per cent from

in liabilities and 3.8 per cent growth in

6.5 per cent and in concert with the

claims on non-residents. The latter was

Bankers’ Association, agreeing to a range

supported by a 13.3 per cent increase in

of banking sector measures to support

ECCB’s imputed reserves.

customers. 1

Domestic claims 2 (credit) declined at a pace

ECCU Monetary Survey Percentage Change

of 3.8 per cent to $9,877.7m, reflecting

(M2) %

(NFA)%

declines of 47.4 per cent and 26.6 per cent

10.0

10.0

in claims on state-owned enterprises and

8.0

5.0

6.0

non-bank financial institutions, respectively.

4.0

0.0

2.0

Concurrently, net claims on central

0.0

-5.0

-2.0

governments rose, influenced by an 18.5 per

-10.0

-4.0

19 Q1

19 Q2

19 Q3

19 Q4

20 Q1

20 Q2

cent increase in liabilities, while household

Money Supply (M2)

Net Foreign Assets

and business credit grew at a measured pace

of 1.8 per cent and 1.2 per cent,

Broad money supply (M2) plunged by

respectively.

10.4 per cent to $16,279.8m during the first

half of 2020, reflecting contractions in

1 The programme included a loan repayment moratorium for an initial period of six months; waiver of late fees and charges and targeted supervisory flexibility

2 Due to a change in methodology in compiling the monetary, the nomenclature changed to ‘claims’ from ‘credit’

10

June 2020 Economic and Financial Review DOMESTIC EONOMIC DEVELOPMENTS

External Sector Developments

ECCU Domestic Credit

EC$M

EC$M

Developments in the ECCU’s external

8000.0

9,500.00 9,600.00 9,700.00 9,800.00 9,900.00 10,000.00 10,100.00 10,200.00 10,300.00 10,400.00

7000.0

accounts indicate that the merchandise trade

6000.0

5000.0

deficit preliminarily narrowed by 21.9 per

4000.0

3000.0

cent to $2,821.7m in the first half of 2020,

2000.0

1000.0

attributed to a 21.1 per cent fall in import

0.0

18 Q4 19 Q1 19 Q2 19 Q3 19 Q4 20 Q1 20 Q2

payments, which far outpaced a 13.4 per

To Households

To Businesses

Total Domestic Credit (DMC)

cent decline in export receipts. The

Notwithstanding the estimated decline in

improvement in the external balance

economic performance at the ECCU level,

reflected similar developments in all eight

indicators tracked show that liquidity in

countries, as a combination of lower crude

the commercial banking system remained

oil prices, travel restrictions and disruptions

at a satisfactory level. At the end of June

in commercial activity all contributed to

2020, the ratio of net liquid assets to total

lesser import payments. Consistent with the

deposits stood at 47.4 per cent, well above

decline in total arrivals, gross travel receipts

the 20.0 per cent established minimum and

more than halved to $1,701.5m from a gross

slightly higher than the level of 44.7

value of $3,612.7m in the first six months of

recorded at the end of 2019. While data on

2019.

non-performing loans was not available for

ECCU Visible Trade

EC$M

3000.0

all member countries at the time of writing,

2000.0

the ratio of non-performing loans to gross

1000.0

loans for a number of member countries

0.0

-1000.0

showed signs of deterioration, reflecting the

-2000.0

adverse impact of the pandemic on

-3000.0

18 Q1 18 Q2 18 Q3 18 Q4 19 Q1 19 Q2 19 Q3 19 Q4 20 Q1 20 Q2

borrowers.

Total Exports

Total Imports

Trade Balance

11

June 2020 Economic and Financial Review DOMESTIC EONOMIC DEVELOPMENTS

and the limitations to intra-regional

Outlook

travel given developments with

The outlook for the remainder of 2020 is

LIAT – the major regional airline.

likely to remain subdued, despite the

gradual reopening of economies

4. Given the great degree of

regionally and globally.

uncertainties

surrounding

the

1. The global economy is estimated to

outlook, short term risks remain

experience a recession in 2020, as

titled to the downside.

the International Monetary Fund

(IMF) projects that global output will

5. These risks include the possibility of

contract by 4.4 per cent.

a resurgence of infections, as borders

re-open and experts do not anticipate

2. The ECCU countries, which rely

the deployment of a vaccine before

heavily on travel services may be

2021

disproportionately affected, as the

economies of all major source

6. The perennial threat of natural

markets are projected to contract. In

disasters persists, particularly from

Box 1 below, the ECCB estimates

the prediction of an above-normal

that the region’s tourism industry is

Atlantic season for 2020

not likely to recover before 2023.

7. On the flip side, the ECCU

3. New challenges to the resumption of

economies are likely to benefit from

tourism activity include the

the decline in international oil prices.

enforcement of covid-19 protocols

12

June 2020 Economic and Financial Review DOMESTIC EONOMIC DEVELOPMENTS BOX 1: TOURISM IN THE ECCU: AN ESTIMATED TIME TO RECOV RY A IDST COVID-19

Covid-19, the first pandemic caused by a coronavirus, triggered border closures and the swift implementation of travel restrictions at a global level, as this was seen as one of the most effective responses to contain the spread of the virus. As a consequence, airlines and cruise companies limited their operations and consumer sentiment for travel significantly declined. Most ECCU member countries responded accordingly, with border closures in conjunction with domestic lockdowns, declaration of state of emergencies and daily curfews. The immediate consequence of these necessary policies in the ECCU was a sudden halt in tourism activity. Given the significance of tourism to overall economic activity and livelihoods (table A), the ECCB assessed the impact of the COVID-19 pandemic on tourism in the currency union, and the consequent effects on the fiscal and external sectors. Most importantly, the ECCB estimated the time at which tourist arrivals is likely to return to pre-pandemic (2019) levels.

13 While recovery times varied by country (table B), by the first quarter of 2024 all markets are expected to revert to pre- pandemic levels. However, the pace of the recovery hinges on the containment of the coronavirus in source markets along with a return of buoyant economic activity. In order to limit and contain the effects of the covid-19 pandemic and lessen the time to recovery the following recommendations are proposed:  Establish an efficient and clear communication strategy, which outlines all travel and health protocols and forms part of the tourism marketing strategy to target low risks source markets.  Target wealthy individuals who are seeking to buy access to COVID-19 safe havens.  Launch a collaborative campaign, utilizing social media and data analytics to target remote workers and students  Urgently resume regional travel against the backdrop of minimal COVID-19 cases in the ECCU and other CARICOM countries to fill the void that is left by the absence of international tourists.  Greater digitization of tourism services and leverage of smaller cruise vessels  Continue to support the most vulnerable members of society especially those in the tourism industry (hotel workers, vendors and taxi operators) through well target social programmes and income support. For the first half of 2020, member governments recorded a n aggregated decline of 16 per cent in tax revenue, hence a larger fiscal deficit is anticipated in 2020. On the external accounts, a current deficit of 20.0 per cent of GDP (EC$3.2b) is projected for 2020 and given its adjustment role, the shock to the central bank’s reserves could average EC$894.1m. Given tourism’s contribution to GDP (table A), and the projected 67.7 per cent contraction in the industry, ECCU’s GDP is forecasted to contract in the range of 10.0 to 20.0 per cent for 2020. To determine the length of time it would take for tourist arrivals to revert to 2019 levels, an error correction model in the form of an autoregressive distributed lag (ARDL) was utilized. Using the error correction mechanism as a benchmark for how quickly the tourism industry recoups after a shock, it is expected that the ECCU tourism industry would be back to normal by the end 2023 or the first quarter of 2024 for all member countries. Underpinning those projections are:  Full reopening and return of international flights and cruise ship calls by the fourth quarter of 2020.  AV-shaped economic recovery in main source markets and unemployment levels return to the 2019 baseline by end of 2021.  There are no further disruptions to the industry, such as hurricanes, terrorism shocks and wars.

June 2020 Economic and Financial Review

ANGUILLA

ANGUILLA

Overview

Real Sector Developments

During the first half of 2020, economic

The total number of visitors to Anguilla

activity in Anguilla was estimated to have

from January to June 2020 declined by

declined, after posting gains in 2019.

Activity in the tourism industry came to a

58.3 per cent to 38,897. This was a

complete halt in the second quarter, as the

reversal of the near tripling of the rate of

borders closed to international travel to

growth in the same period in 2019. Stay over

contain the spread of the COVID-19

arrivals fell by 58.5 per cent to 23,198,

pandemic. Although the ongoing Anguilla

reflecting reductions from all source

Programme 3 added some buoyancy in the

markets, notably the major markets of the

construction sector, it was not sufficient to

Caribbean (65.9 per cent), United Kingdom

offset the large contraction brought about by

(60.7 per cent), the USA (59.3 per cent),

the lack of tourism activity. The economy

Canada (48.3 per cent) and other Europe

is expected to remain in a recessive state for

(49.5 per cent). The number of

the rest of 2020, with a marginal uptick

excursionists also fell by 57.9 per cent to

projected in 2021.

15,699.

3 The Anguilla Programme consists of capital grant funding of £60m from the UK government, allocated to support reconstruction after Hurricane Irma.

14

June 2020 Economic and Financial Review

ANGUILLA

indices of housing, utilities, gas and fuels

Anguilla Visitor Arrivals

Thousands

(3.2 per cent), transport (6.1 per cent) and

35.0

communication (0.5 per cent). Meanwhile,

30.0

25.0

the food and non-alcoholic beverages sub-

20.0

15.0

index rose by 2.7 per cent, led by higher

10.0

5.0

prices of meats.

0.0

18 Q1 18 Q2 18 Q3 18 Q4 19 Q1 19 Q2 19 Q3 19 Q4 20 Q1 20 Q2

Anguilla Consumer Price Index Percentage Change

Stay-overs

Excursionists

Note: yacht data not available for Anguilla

%

3.0

2.0

Other sectors that were adversely impacted

1.0

0.0

by the reduction of tourism activity were

-1.0

wholesale and retail trade; transport, storage

-2.0

-3.0

and communications; and real estate, renting

18 Q1 18 Q2 18 Q3 18 Q4 19 Q1 19 Q2 19 Q3 19 Q4 20 Q1 20 Q2

All Items Food & Non-Alchoholic Beverages Energy

Note: Energy includes housing, utilities, gas & fuels

and business activities. Meanwhile, value

added in the construction sector was

Fiscal Developments

estimated to have increased, driven

The fiscal position of the Government of

primarily by the United Kingdom funded

Anguilla was adversely impacted by the

Anguilla Programme, which saw new

construction and renovation of various

slowdown in economic activity. An overall

public buildings.

fiscal deficit of $17.3m was recorded for the

first six months of the year, following a

The consumer price index fell at a steeper

surplus of $24.8m for the comparable period

rate of 1.3 per cent in the first six months

in 2019. The same observation held for the

of 2020, than the 0.2 per cent in the same

primary balance, which moved to a deficit

period in 2019, in line with the global

of $10.8m from a surplus of $34.3m in

downward trend in oil prices. Price

June 2019.

decreases were observed in the major sub-

15

June 2020 Economic and Financial Review

ANGUILLA

financed partly by capital revenue, which

Anguilla Public Finance

EC$M

-20.0 -10.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0

totalled $0.8m.

Banking Sector Developments

Anguilla Monetary Survey Percentage Change

(M2) %

(NFA)%

-10.0 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0

25.0

18 Q1 18 Q2 18 Q3 18 Q4 19 Q1 19 Q2 19 Q3 19 Q4 20 Q1 20 Q2

20.0

15.0

10.0

Recurrent Revenue Recurrent Expenditure Current Account Balance

5.0

0.0

Developments on the current account gave

-5.0

-10.0

rise to a current account deficit of $14.9m in

19 Q1

19 Q2

19 Q3

19 Q4

20 Q1

20 Q2

contrast to a surplus of $26.2m in the

Money Supply (M2)

Net Foreign Assets

During 2020, Broad Monetary liabilities

corresponding period of 2019. Current

(currency in circulation and deposits)

revenue fell by 39.8 per cent to $76.3m,

declined by 19.6 per cent to $873.2m,

reflecting declines in all of the broad

categories of taxes – incomes and profits

largely due to a fall in foreign currency

($1.6m), property ($3.1m), domestic goods

The net foreign assets

deposits ($178.0m).

and services ($11.5m) and international

of the banking system rose by 5.3 per cent

trade and transactions ($29.9m). Non-tax

to $645.0m, following an increase of

revenue also declined by $4.3m to $13.7m.

15.5 per cent in 2019. Net domestic assets

In adjusting to the steep drop in revenue,

(credit) fell by 51.7 per cent to $228.2m,

mainly due to lower claims 4 (credit) on

current expenditure was contained, falling

by 9.3 per cent to $91.2m. contractions in

households and businesses. The net

expenditure were noted for transfers and

liabilities position of the government

subsidies ($3.7m), goods and services

declined to $50.2m from $66.7m at the end

($3.1m), and interest payments ($2.9m). In

of December 2019. Outstanding credit

contrast, the amount spent on personal

amounted to $566.3m at the end of

emoluments rose by $0.3m. Capital

June 2020. Credit allocation was highest for

expenditure increased by $1.9m to $3.3m,

private households; real estate activities;

4 Due to a change in methodology in compiling the monetary, the nomenclature changed to ‘claims’ from ‘credit’

16

June 2020 Economic and Financial Review

ANGUILLA

accommodation and food services; and

56.3 per cent to $107.0m during the period

construction and land development.

of review.

Anguilla Visible Trade

Anguilla Domestic Credit

EC$M

EC$M (DMC)

EC$M

300.0

400.0

560

200.0

350.0

540

100.0

300.0

520

250.0

0.0

500

200.0

-100.0

480

150.0

460

-200.0

100.0

440

50.0

-300.0

18 Q1 18 Q2 18 Q3 18 Q4 19 Q1 19 Q2 19 Q3 19 Q4 20 Q1 20 Q2

0.0

420

18 Q4 19 Q1 19 Q2 19 Q3 19 Q4 20 Q1 20 Q2

Total Exports

Total Imports

Trade Balance

To Households

To Businesses

Total Domestic Credit (DMC)

The banking system remained highly liquid

Outlook

at the end of June 2020, with the ratio of net

The economy of Anguilla is projected to

liquid assets to total deposits rising by

record negative growth in 2020, as

2.4 percentage points to 52.8 per cent.

tourism activity is not anticipated to

Meanwhile, the quality of commercial bank

recover for the rest of the year. However,

assets deteriorated as the ratio of non-

construction activity will cushion some of

performing loans to gross loans rose to

the fallout from tourism. Other downside

26.3 per cent from 25.8 per cent at the end

risks include adverse weather and

of December 2019.

interruptions to global trade due to

geopolitical conflicts. Domestically, given

External Sector Developments

the number of persons employed in the

Consistent with the contraction in economic

tourism industry, the increase in

activity, the deficit on the merchandise trade

unemployment will continue to affect

account fell to $201.7m at the end of

domestic consumption. Of note, the tax

June 2020 from $326.5m over the same

revenue shortfall in 2020 will be met by UK

timeframe in 2019. The import bill fell by

budgetary support, allowing for some level

$135.9m, while export receipts declined by

of normalcy in government operations.

$11.1m. Gross travel receipts decreased by

17

June 2020 Economic and Financial Review

ANTIGUA AND BARBUDA

ANTIGUA AND BARBUDA

Overview

Real Sector Developments

The COVID-19 pandemic, and the

The economic contraction in the first half

stringent containment measures which

of 2020 reflected declines in all the key

have been implemented worldwide,

sectors, as containment measures resulted

triggered a contraction in economic

in major disruptions to economic activity.

activity in Antigua and Barbuda in the

Tourism activity is estimated to have

first half of 2020. 5

While the long-term

declined, evidenced by a 44.8 per cent

impact of the pandemic remains uncertain,

contraction in total visitor arrivals to

the outlook for the economy for the

351,538, underpinned by declines in the

remainder of the year is expected to be

stay-over (47.8 per cent), cruise

hampered by subdued global economic

(43.8 per cent) and yachting (41.7 per cent)

activity, increasing uncertainty and the

segments. The fall in stay-over arrivals

attendant effects on private sector and

reflected declines from all source markets,

government activity.

including the Caribbean (62.9 per cent),

5 Antigua and Barbuda closed the VC Bird International Airport to all international commercial flights beginning 27 March and reopened on 01 June 2020. The government also initially ordered a 24-hour curfew from

2 April to 9 April which prohibited movement during the day by non-essential workers except for food and emergency supplies.

18

June 2020 Economic and Financial Review

ANTIGUA AND BARBUDA

Europe (53.4 per cent), the United States of

sector was partially tempered by continued

America (44.1 per cent) and Canada

work on the new cruise pier.

(33.5 per cent). Reflecting the fallout in

Influenced by developments in global

tourism, the ancillary service sectors,

including

transport,

storage

and

energy prices and the contraction in

communication, wholesale and retail trade

economic activity, the inflation rate, as

and real estate, renting and business

measured by the Consumer Price Index

activities are all preliminarily estimated to

(CPI) fell by 0.2 per cent in the first half

have experienced declines.

of 2020 from 1.5 per cent one year earlier.

Antigua and Barbuda Consumer Price Index Percentage Change

Antigua and Barbuda Visitor Arrivals

Thousands

%

100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0

4.0

3.0

2.0

1.0

0.0

-1.0

-2.0

0.0 50.0

-3.0

18 Q1 18 Q2 18 Q3 18 Q4 19 Q1 19 Q2 19 Q3 19 Q4 20 Q1 20 Q2

18 Q1 18 Q2 18 Q3 18 Q4 19 Q1 19 Q2 19 Q3 19 Q4 20 Q1 20 Q2

All Items Food Energy

Note: Energy includes fuel and light

Stay-overs Cruise Ship Passengers (Includes Excursionists)

Yacht Passengers

The fall in the index was associated with

An estimated contraction in the construction

lower prices in the sub-indices of hotels and

sector reflected lower private and public

restaurants (5.2 per cent), transport

sector construction activity, as a number of

(3.2 per cent), health (2.3 per cent),

projects were deferred. The volume of

recreation and culture (2.3 per cent), and

cement imports, a proxy of construction

housing, utilities, gas and fuels

activity, is estimated to have declined by

(0.1 per cent), while the price levels of the

24.8 per cent in the first half of the year, in

remaining sub-indices rose.

contrast to growth of 11.2 per cent in the

corresponding period of 2019. In the public

Fiscal Developments

sector, spending on the government’s capital

Provisional fiscal data for the first half of

programme fell by 3.9 per cent, while the

2020 indicate that the fiscal deficit

pace of private construction is estimated to

narrowed to $38.6m, from one of $58.6m

have decelerated. Reduced activity in the

in the comparative period in the previous

19

June 2020 Economic and Financial Review

ANTIGUA AND BARBUDA

Concurrently, spending pressures partially

year, due mainly to an improvement in

subsided, on account of the introduction of a

A current account

the current account.

shift system and remote working by the

deficit of $4.2m was recorded and

public sector, as well as moratoriums on

government’s primary surplus position

government debt repayments. Current

improved to $11.1m.

expenditure declined by 13.0 per cent

Antigua and Barbuda Public Finance

EC$M

($59.3m) to $397.8m, reflecting reduced

-100.0 -50.0 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0

expenditure on all major expenditure items,

including goods and services ($33.6m),

transfers and subsidies ($14.5m), interest

payments ($9.3m) and personal emoluments

($1.8m). Capital revenue fell by $0.7m to

18 Q1 18 Q2 18 Q3 18 Q4 19 Q1 19 Q2 19 Q3 19 Q4 20 Q1 20 Q2

$1.3m and investment in the government’s

Recurrent Revenue Recurrent Expenditure Current Account Balance

capital programme retreated by 3.9 per cent

($1.5m) and stood at $35.6m, as a number

Against the backdrop of widespread hotel

of projects were suspended.

closures and limited commercial activity

from disruptions in business operations,

Banking Sector Developments

current revenue declined by 9.2 per cent

($40.0m) to $393.6m. This was driven by

Consistent with the contraction in

contractions in taxes on domestic goods and

economic activity, monetary liabilities

services ($18.5m), international trade and

(M2), which comprise currency issued

transactions ($12.3m) and property ($9.8m),

and bank deposits, fell by 6.3 per cent

while taxes on income and profits rose by

during the first six months of 2020 to an

$8.7m. These declines were compounded

aggregate value of $3,619.7, following a

by an $8.0m falloff in non-tax revenue, due

2.5 per cent increase in 2019.

to lower receipts from the Citizenship-by-

Investment (CBI) programme, which

amounted to $40.8m for the period.

20

June 2020 Economic and Financial Review

ANTIGUA AND BARBUDA

on other sectors, as net claims to central

Antigua and Barbuda Monetary Survey Percentage Change

government rose by 7.9 per cent.

(M2) %

(NFA)%

-10.0 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0

15.0

10.0

Antigua and Barbuda Domestic Credit

5.0

EC$M DMC

EC$M

0.0

1400.0

2420.00 2440.00 2460.00 2480.00 2500.00 2520.00 2540.00 2560.00 2580.00 2600.00

-5.0

1200.0

-10.0

1000.0

800.0

-15.0

19 Q1

19 Q2

19 Q3

19 Q4

20 Q1

20 Q2

600.0

400.0

Money Supply (M2)

Net Foreign Assets

200.0

0.0

Declines in both quasi money (8.0 per cent)

18 Q4 19 Q1 19 Q2 19 Q3 19 Q4 20 Q1 20 Q2

To Households

To Businesses

Total Domestic Credit (DMC)

and narrow money (1.7 per cent) contributed

to this decline. The decline in narrow

Despite the observed declines in deposit

money was underpinned by a 5.4 per cent

holdings during the review period, the

decline in currency in circulation, as the

liquidity position of the banking system in

crisis may have resulted in greater use of

Antigua and Barbuda remained moderately

cards and other forms of electronic

healthy at the end of June 2020. The ratio

payments. After having contracted by 1.8

of total loans and advances to total deposits

per cent in the preceding year, the net

inched upwards to 70.3 per cent from

foreign assets of the banking system

69.2 per cent at end December 2019, while

advanced by 0.5 per cent to $1,768.5m in

the ratio of net liquid assets to total deposits

the period reviewed. The expansion was

rose by 1.8 percentage points to

attributable to a 15.3 per cent decline in

41.1 per cent, above the ECCB minimum

liabilities to non-residents, alongside a fall

benchmark of 20.0 per cent.

Asset quality

of 5.8 per cent in non-resident claims.

of the banking system improved as the ratio

Reversing the 0.8 per cent expansion in the

of commercial banks’ non-performing loans

previous year, domestic claims 6 contracted

to total loans inched lower to 5.2 per cent,

by 2.1 per cent to $2,508.9m, partly

from 5.3 per cent at the end of 2019, partly

influenced by a 3.9 per cent drop in claims

due to the loan payment deferral

programme. 7

6 Due to a change in methodology in compiling the monetary, the nomenclature changed to ‘claims’ from ‘credit’

7 To mitigate the impact of the crisis on borrowers, the ECCB in collaboration with the Bankers’ Association agreed

21

June 2020 Economic and Financial Review

ANTIGUA AND BARBUDA

of 2020, relative to the comparative period

External Sector Developments

of 2019.

Antigua and Barbuda Visible Trade

EC$M

800.0

600.0

Outlook

400.0

200.0

Economic activity in Antigua and

0.0

Barbuda is expected to contract markedly

-200.0

-400.0

in 2020, driven by the continuing impact

-600.0

18 Q1 18 Q2 18 Q3 18 Q4 19 Q1 19 Q2 19 Q3 19 Q4 20 Q1 20 Q2

of the pandemic. Internationally, the global

Total Exports

Total Imports

Trade Balance

economy is expected to enter into recession

The merchandise trade deficit narrowed

this year, with the associated impact on

by 28.0 per cent to $646.6m in the first six

Antigua and Barbuda’s major source

months of 2020, primarily associated with a

markets, including the USA and Europe.

decline of 26.8 per cent in the value of

Although travel and tourism have gradually

imports. This outturn was influenced by

resumed and some of the containment

significantly lower payments in all

measures have been lifted, the hotels and

categories of imports, with the largest

restaurants sector may continue to be

declines emanating from mineral fuels and

challenged by a resurgence in COVID-19

related materials (29.3 per cent) and

cases and the continuing physical distance

machinery, transport equipment (27.8 per

protocols.

cent). The decline in import payments was

partly offset by a 3.7 per cent falloff in the

Domestic conditions are therefore expected

to be challenging. While the implementation

value of exports, largely driven by a

contraction in the value of re-exports of

of capital projects such as the new cruise

machinery and transport equipment.

pier and the St John’s port redevelopment

project is expected to continue and may help

Consistent with the sharp decline in total

visitor arrivals, generated by global travel

support growth, their impact is likely to be

restrictions, gross travel receipts contracted

limited. Weak labour market conditions are

likely to constrain consumer spending, while

by 45.4 per cent to $592.7m in the first half

fiscal constraints may limit government’s

to a loan repayment deferral programme in March 2020 for an initial period of six months

22

June 2020 Economic and Financial Review

ANTIGUA AND BARBUDA

ability to undertake countercyclical

regarding the extent and the duration of the

measures to counteract the challenging

pandemic. Consequently, downside risks

domestic and external environment.

including the potential adverse health impact

Government’s balances are therefore

of the pandemic, the pace of the global and

expected to further deteriorate. This

domestic recovery, fiscal challenges and the

projection is however subject to

potential effect of the 2020 hurricane season

considerable

uncertainty

especially

are likely to prevail in the near term.

23

June 2020 Economic and Financial Review THE COMMONWEALTH OF DOMINICA

THE COMMONWEALTH OF DOMINICA

Overview

Preliminary estimates indicate that

introduced measures to contain the spread

economic activity in the Commonwealth

of the virus in the country.

The construction sector is estimated to have

of Dominica declined in the first half of

declined in the first half of the year, as both

2020, due to the COVID-19 pandemic.

public and private sector projects were

The estimated time for recovery will be

temporarily stalled due to lockdown and

partly dependent on the pace of recovery of

curfew restrictions and private sector starts

major trading partners.

declined by 57.3 per cent. However, there

were a few capital projects that resumed in

Real Sector Developments

the latter part of the second quarter including

Economic activity in the Commonwealth

the Edward Oliver Leblanc Highway

of Dominica is estimated to have declined

Rehabilitation, the Roseau Enhancement

in the first half of 2020, relative to the

Project and the construction of the

first six months of the previous year. This

Tranquility Bay Beach Hotel. In the

development is attributable to the

manufacturing sector, production was

COVID-19 pandemic, as the government

adversely affected by the implementation of

COVID-19 containment measures as well as

24

June 2020 Economic and Financial Review THE COMMONWEALTH OF DOMINICA

a general decline in global demand.

Dominica Consumer Price Index Percentage Change

Total production is estimated to have

%

6.0

declined largely due to 12.0 per cent drop in

4.0

2.0

paints and a 4.0 per cent decline in

0.0

beverages.

-2.0

-4.0

18 Q1 18 Q2 18 Q3 18 Q4 19 Q1 19 Q2 19 Q3 19 Q4 20 Q1 20 Q2

All Items Food & Non-Alchoholic Beverages Energy

Dominica Visitor Arrivals

Note: Energy includes Housing, Utilities, Gas & Fuels

Thousands

150.0

sector benefited from increased public

100.0

investment.

50.0

Deflationary pressures were observed in

0.0

18 Q1 18 Q2 18 Q3 18 Q4 19 Q1 19 Q2 19 Q3 19 Q4 20 Q1 20 Q2

the first half of 2020. The consumer price

Stay-overs Cruise Ship Passengers

Yacht Passengers Excursionists

index decreased by 0.7 per cent, associated

Given that the country’s borders were closed

with declines in the prices of transport

for the entire second quarter due to the

(3.2 per cent), hotels and restaurants

pandemic, the total number of visitor

(0.6 per cent) and housing, utilities, gas and

arrivals is estimated to have decreased by

fuels (0.4 per cent).

34.0 per cent to 136,273. This fall largely

reflected declines of 24.0 per cent and 58.3

Fiscal Developments

per cent in cruise ship passengers and stay-

The fiscal operations of the government

over arrivals, respectively. The largest

resulted in an overall deficit of $91.6m in

declines in the stay-over category were from

the first half of 2020, a significant

the Caribbean (66.3 per cent), Europe (48.9

improvement from one of $233.6m

per cent) and the USA (41.9 per cent).

recorded in the corresponding period of

Agriculture was the only sector to register

Similarly, a primary deficit of

2019.

an increase in value added for the first half

$71.7m was realized, up from one of

of the year. Although the pandemic resulted

$215.8m. The improvement in the fiscal

in a downturn in economic activity, it led to

balances was mainly driven by a reduction

an increase in agricultural output as the

in expenditure, which outpaced the decline

25