126 / 173
2018 Annual Economic and Financial Review ST VINCENT AND THE GRENADINES
______________________________________________________________________________
116
Eastern Caribbean Central Bank
productive sectors, increases in outstanding
credit were registered in professional services
(3.7 per cent) and public administration
(2.1 per cent). Notwithstanding the moderate
growth in household credit in 2018, the
continued decline in business lending,
particularly in the productive sectors, may
adversely impact growth and the employment
outlook for 2019.
Meanwhile, outstanding credit to the personal
sector maintained its expansion, albeit at a
slightly slower pace of 1.5 per cent than the
previous year (3.3 per cent). Credit extended
to this category was mainly allocated to
property acquisition and consumer durables.
Lending for property acquisition grew by
2.5 per cent, easing from the 7.8 per cent
recorded during the prior year. Concurrently,
credit for the purchase of consumer durables
also slowed considerably at 1.2 per cent from
the robust pace of 8.0 per cent observed in
2017.
Net foreign assets of the banking system fell
by 1.4 per cent to $599.1m, at the end of
2018, following an accelerated pace of
8.2 per cent during 2017.
This contraction
was mainly fuelled by a 6.6 per cent decline
in St Vincent and the Grenadines’ imputed
share of the Central Bank’s reserves to
$454.9m. This contraction was offset by a
19.3 per cent increase in the net foreign assets
of commercial banks to $144.2m, and was
largely associated with a higher
(16.4 per cent) asset position with banks
within the currency union.
The liquidity position of the banking system
remained healthy during the period under
review. This was indicated by a fall in the
ratio of liquid assets to total deposits plus
liquid liabilities. The ratio stood at
43.1 per cent as at end 2018, from
44.4 per cent recorded during 2017. In
addition, the ratio of loans and advances to
total deposits inched higher to 69.2 per cent
from 68.9 per cent in 2017, but still below the
ECCB’s recommended threshold of 75.0 to
85.0 per cent.
Asset quality in the banking sector, measured
by the ratio of non-performing loans (NPLs)
to total loans, continued to improve during the
review period. The NPL ratio fell to
6.5 per cent at the end of December 2018 from
8.2 per cent one year earlier. The
improvement in this ratio was largely due to
proactive collection strategies by a number of
commercial banks and an improvement in
commercial banks’ underwriting practices.