Annual Economic and Financial Review -December 2018

2018 Annual Economic and Financial Review

DOMESTIC ECONOMIC DEVELOPMENTS

An assessment of the commercial banking system indicated that it remained relatively liquid during the review year. At the end of December, the ratio of liquid assets to short- term liabilities stood at 39.7 per cent, well above the 25.0 per cent minimum established by the ECCB’s prudential guidelines and slightly higher than the level recorded at the end of 2017. The loans and advances to total deposits ratio rose marginally (0.2 percentage point) to 58.8 per cent, which remained well beneath the ECCB’s stipulated lower limit of 75.0 per cent.

Credit for utilities, electricity and water increased by 47.4 per cent ($94.6m), in stark contrast to a decline of 16.2 per cent extended one year ago. Consistent with the buildup in the construction sector and the tourism industry, lending for these purposes grew by 6.8 per cent and 4.5 per cent, respectively. Notwithstanding an improvement in manufacturing activity, credit extended to that sector declined by 6.5 per cent ($11.8m). In addition, lending for personal use fell marginally (0.2 per cent), despite an increase in borrowing for durable consumer goods. The net foreign assets of the ECCU’s banking system rose by 5.9 per cent to $8,736.7m, compared with an increase of 11.6 per cent during the last year. The improvement in the net foreign assets position was primarily attributed to growth in the net foreign assets of the commercial banking sector. Commercial banks’ net external position expanded by 15.1 per cent to $4,081.0m, primarily influenced by an 11.6 per cent rise in their foreign assets, notwithstanding growth of 7.8 per cent in their foreign liabilities. The net external position of the Central Bank fell by 1.1 per cent to $4,655.7m, as its foreign liabilities more than tripled.

External Sector Developments

Preliminarily, the merchandise trade balance demonstrated further deterioration in 2018. The deficit widened by 18.8 per cent to $7,608.0m (37.8 per cent of GDP), after having deteriorated by 3.6 per cent in 2017.

______________________________________________________________________________ 14 Eastern Caribbean Central Bank