ECCB 2016/2017 Annual Report

ECCB ANNUAL REPORT 2016/2017

he fixed exchange rate arrangement remained

stable during the year, supported by strong foreign

reserve accumulation and adequate domestic growth

among ECCB member countries. As at 31 March 2017,

the backing ratio was 97.39 per cent. This is the ratio

of foreign assets to demand liabilities and it remained

well above the statutory limit of 60.0 per cent and the

operational target of 80.0 per cent.

The fixed exchange rate arrangement has enabled

stable prices to prevail in the ECCB member territories.

During 2016, consumer prices decreased on average

by 1.8 per cent compared with a decrease of 0.8 per

cent in 2015. Prices have generally remained at low

levels due to the historically low global commodity

prices.

In real terms, the Gross Domestic Product (GDP) of the

ECCU grewby 2.2 per cent in 2016, a slightly slower rate

when compared with the rate of growth in the previous

year, of 2.6 per cent. This growth outcome was in line

with an overall slowdown in global growth during 2016,

including the region’s main trading partner, the United

States of America. However, growth is expected to

recover in 2017 as global output increases. Real GDP

in the ECCU is projected to expand by 2.7 per cent in

2017 and 3.1 per cent in 2018, supported primarily by

activity in the construction, hotels and restaurants,

transport, storage and communication, real estate,

renting and business activities sectors.

The growth in money supply (M2) increased by 0.8

per cent in 2016 relative to the growth of 3.9 per cent

observed in the previous year. The deceleration in the

rate of growth in the money supply was due to declines

in private sector time and foreign currency deposits,

which decreased by 8.6 per cent and 3.9 per cent,

respectively. Similarly, domestic credit contracted by

8.9 per cent, a reflection of continued conservatism

and risk aversion by the commercial banking sector

as economic uncertainty persisted. The decline in

credit was principally a consequence of reduced

credit extension to the business community and the

central government. In addition, tighter underwriting

standards have resulted in an overall lower credit

environment.

MACROECONOMIC SURVEILLANCE

The principal objectives of the macroeconomic

surveillance are to monitor developments in member

territories; disseminate macro data and information

via the publication of quarterly and annual economic

and financial reviews; and prepare policy papers on

issues relevant to fiscal and debt sustainability, and

the growth and development of member states.

To this end, technical assistance was provided to

member countries in their preparation for missions of

international organisations including: the International

Monetary Fund (IMF) and the International Bank for

Reconstruction and Development (IBRD), a division of

The World Bank.

Chart I - ECCU selected indicators, per cent change