Annual Economic and Financial Review -December 2018

2018 Annual Economic and Financial Review ST KITTS AND NEVIS

Domestic credit declined by 46.9 per cent to $74.4m, compared with a decrease of 51.2 per cent in 2017, for the most part attributable to an increase in the net deposit position of the general government. The net deposit position of the general government rose by 55.3 per cent ($184.4m) to $518.2m on the strength of a 19.1 per cent ($133.9m) rise in central government deposits to $195.5m coupled with a 42.2 per cent ($61.6m) reduction in commercial bank credit. However, the decline in domestic credit was partly moderated by two developments . First, a decrease in the net deposit position of non-financial public enterprises (NFPE) by 9.7 per cent to $912.8m, fuelled largely by a near doubling ($59.8m) in outstanding loans. Secondly, lending to the private sector rose by 1.4 per cent ($21.1m) to $1,505.4m, attributable to higher lending to households and businesses of 1.7 per cent ($15.4m) and 1.5 per cent ($7.6m) respectively. An overview of the distribution of credit by economic activity revealed higher lending to public administration, public utilities, personal lending, manufacturing and distribution, in contrast to decreased allocations to the major productive sectors of

both the external and domestic debt portfolios. Central government debt accounted for 74.4 per cent of total debt while statutory bodies accounted for the remaining 25.6 per cent.

Banking Sector Developments

Monetary liabilities (M2) contracted by 1.7 per cent to $2,759.8m, compared with a decrease of 3.4 per cent during 2017.

This development was attributable to a 1.6 per cent contraction in quasi money to $2,206.9m, combined with a 2.1 per cent reduction in narrow money to $552.9m. The decrease in quasi money was for the most part related to a 6.5 per cent ($47.0m) reduction in foreign currency deposit balances. Narrow money (M1) fell, associated with declines in demand deposits and a decrease in the issuance of EC dollar cheques and drafts of 5.3 per cent and 15.6 per cent respectively.

______________________________________________________________________________ 88 Eastern Caribbean Central Bank