Annual Economic and Financial Review -December 2018

2018 Annual Economic and Financial Review ST VINCENT AND THE GRENADINES

$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.

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

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