Annual Economic and Financial Review -December 2018

2018 Annual Economic and Financial Review ST VINCENT AND THE GRENADINES

1.7 per cent to $1,565.1m during 2018, when compared to growth of 1.2 per cent during 2017. The expansion in M2 largely reflected the growth in narrow money, which was tempered by a contraction in quasi money. Narrow money recorded an expansion of 8.4 per cent to $516.0m, reflecting increases of 11.7 per cent and 7.9 per cent in currency with the public and private sector demand deposits respectively. The expansion was dampened by a 1.3 per cent decline in quasi money to $1,049.2m, primarily on account of contractions in foreign currency deposits (12.2 per cent) and time deposits (4.8 per cent) of the private sector. The net credit position of commercial banks increased by 1.5 per cent to $1,107.3m in 2018 from the prior year’s position of $1,091.0m . Contributing to this expansion was an 11.7 per cent increase in net credit to government, partially attributable to a 12.9 per cent decline in deposits. Concurrently, the net deposit position of non- financial public enterprises fell by 3.2 per cent to $101.8m, while private sector borrowing rose by a marginal 0.2 per cent during the period.

The subdued expansion in private sector credit was driven largely by outstanding credit to households, which continued to dominate credit to the sector. Credit to households grew at a decelerated rate of 2.3 per cent during the period, following a rate of 3.7 per cent during the previous year. Conversely, banking sector data indicated another year of credit contraction to the corporate sector, despite the estimated improvement in economic activity. Following an 11.2 per cent reduction in 2017, credit to that sector plunged further by 12.6 per cent, which was reflective of a more prudent approach to credit underwriting by some commercial banks and risk aversion by many small and family-owned businesses. An analysis of the allocation of bank credit by economic activity revealed that loans and advances to the private sector fell by 0.7 per cent to $1,222.7m during 2018, following the 2.6 per cent expansion recorded during 2017. This outturn stemmed from declines in outstanding credit to a number of the key sectors. Declines were registered in outstanding credit to tourism (39.9 per cent), transport (29.9 per cent), manufacturing (18.3 per cent) and distributive trades (8.4 per cent). These contractions were moderated by a 4.8 per cent expansion in credit extended to construction. Of the non-

______________________________________________________________________________ 115 Eastern Caribbean Central Bank

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