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2018 Annual Economic and Financial Review
DOMESTIC ECONOMIC DEVELOPMENTS
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2
Eastern Caribbean Central Bank
The overall balance on the consolidated fiscal
accounts of member governments reverted to
a surplus position after recording a deficit last
year. The turnaround resulted from
developments on the current account, which
more than offset the impact of higher capital
outlays. Despite the improvement in the
overall fiscal performance, the outstanding
debt of the public sector rose, driven in part
by increases in both external and domestic
borrowing. The overall robust economic
activity was reflected in the major monetary
aggregates of the banking sector, as net
foreign assets, monetary liabilities and
domestic credit recorded expansions.
Liquidity in the commercial banking system
improved, associated with an expansion in the
deposit base, despite an increase in credit. In
the external sector, the merchandize trade
deficit widened, largely driven by growth in
import payments.
Short to medium term growth forecasts for
the economy of the ECCU are favourable,
based on positive GDP projections for all
member territories.
The main impetus for
this outlook is the anticipated robust
construction
activity,
supported
by
strengthened performances in other major
sectors, including hotels and restaurants, one
of the main proxies for activity in the tourism
industry. Any improvement in these sectors
of the economy is likely to have associated
positive knock-on effects on a number of
auxiliary sectors, including wholesale and
retail trade and transport, storage and
communications. Inflationary pressures are
likely to persist but remain constrained. This
is premised on the expectations of a slowdown
in global economic activity and moderation in
commodity prices relative to the levels in
2018, especially oil. However, sustained
improvements in domestic demand is expected
to put upward pressures on the non-tradable
component of the consumer basket, partially
offsetting some of the downward pressures
from fall in international prices. It is
anticipated that despite fiscal and debt
challenges,
the
positive
economic
performance, along with governments’
continued fiscal consolidation and debt
management efforts, may contribute to an
overall surplus.
The economic outlook for the ECCU region
remains contingent on developments in the
global economy, which notwithstanding
downside risks, is projected to expand by
3.3 per cent in 2019
. Downside risks to the
forecasts include uncertainty in the
achievement of global growth targets,
challenges associated with the UK with