28 / 173
2018 Annual Economic and Financial Review
DOMESTIC ECONOMIC DEVELOPMENTS
______________________________________________________________________________
18
Eastern Caribbean Central Bank
Moreover, along with the greater need to be a
competitive region, policies to tackle head on
the social challenges of poverty,
unemployment and crime that confront the
region, must be top priority.
On the external accounts, the merchandise
trade deficit is expected to widen, on the
premise of higher import payments.
The
total import bill for the region is likely to
increase, associated with the anticipated
buoyancy in the construction sector and
rebuilding and renovating activities post-
hurricane. As the number of visitors increase,
so does the tendency to augment imports to
cater to the increasing demand; hence further
developments in the tourism industry are also
expected to contribute to a higher import bill.
Stable conditions in the financial sector are
expected to persist, driven by on-going
efforts of the ECCB to strengthen that
sector.
The implementation of a Fintech pilot
project in the ECCU aimed at bolstering the
region’s competitiveness augurs well for the
banking sector. Monetary aggregates are
projected to expand, driven by increases in
private sector savings and demand deposits,
consistent with positive forecast for growth in
2019. Credit to the private sector, however,
is likely to moderate, as lending conditions
may remain relatively tight. Liquidity is
likely to ease further as macroeconomic
conditions improve. Amid uncertainty,
persistent fiscal deficits and unsustainable debt
levels, efforts to address any weaknesses in
the banking system and to mitigate the impact
of potential risks are among major policy
priorities for the continued development of the
region and its people.
Although global dynamics indicate
economic expansion in 2019, significant
risks remain, which can potentially derail
the realization of these forecasts
. These
risks tilt to the downside and include lower
than anticipated global economic activity,
attributable in part to an escalation of trade
tension and the uncertainties for the UK
economy associated with Brexit. The
materialization of these risks can negatively
influence the demand for leisure and impact
tourism activity, which plays a key role in the
region’s economy. Additionally, investment
flows to the ECCU have serious growth
implication and remain vulnerable to external
market conditions. Like all other countries,
the ECCU needs to implement measures to
boost potential output growth and foster
inclusivity. On the domestic front, continuous
accumulation of debt, emanating from larger
financing gaps associated with fiscal