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12
ECCB ANNUAL REPORT 2016/2017
T
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