Annual Economic and Financial Review -December 2018

2018 Annual Economic and Financial Review

SAINT LUCIA

Domestic credit contracted by 3.3 per cent to $2,734.1m, compared with a decline of 5.0 per cent recorded during 2017 . Despite an increase in central government borrowing from the financial system, decreased lending to the private sector and non-financial public enterprises influenced the contraction. Outstanding credit to the private sector fell by 1.0 per cent, reflecting declines of 2.8 per cent and 1.6 per cent in credit to businesses and households, respectively. Outstanding loans to non-financial public enterprises fell by 6.2 per cent to $35.6m, while their deposits grew by 13.2 per cent ($77.9m). By contrast, the central government’s transactions resulted in a net credit position of $210.8m compared with one of $191.8m at the end of 2017. Commercial banks’ loans and advances to government increased by 13.5 per cent, while their deposits fell by 12.8 per cent. In addition, the net credit position of non-bank financial institutions more than doubled to $42.4m, driven by an increase in loans to these institutions. An analysis of the distribution of commercial banks’ credit by economic activity suggests that outstanding loans and advances fell marginally (0.5 per cent), compared with a decline of 3.9 per cent during the previous

Banking Sector Developments

Broad money supply (M2) expanded by 3.4 per cent to $3,238.9m, compared with a marginal increase of 0.2 per cent during 2017.

While both components contributed to the expansion in M2, the larger share was attributed to growth in narrow money (M1). M1 rose by 11.7 per cent ($106.1m) to $1,016.1m, predominantly owing to an increase of 12.8 per cent in private sector demand deposits, supported by a more than doubling of EC$ cheques and drafts issued and growth of 2.4 per cent in currency with the public. Quasi money rose marginally to $2,222.8m from $2,222.5m last year, influenced by an increase of 3.1 per cent ($49.8m) in private sector savings deposits.

______________________________________________________________________________ 101 Eastern Caribbean Central Bank