BASSETERRE, ST. KITTS, JULY 18TH 2011 – Following a decline of 5.4 percent in real output in 2009, the Eastern Caribbean Currency Union (ECCU) recorded a second consecutive year of negative growth in 2010 when a contraction of 1.8 percent was recorded, the Eastern Caribbean Central Bank (ECCB) is reporting.
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New Chairman of the Monetary Council, Montserrat’s Chief Minister and Minister of Finance, Hon. Ruben Meade addresses opening ceremony (Photo courtesy of Spirit of Montserrat) |
According to the communiqué issued at the 70th meeting of the Monetary Council of the Eastern Caribbean Central Bank at the Montserrat Cultural Centre Conference Room in Montserrat on Friday 15th July 2011, many sectors including construction, wholesale and retail and financial services continued to decline, albeit at a slower rate than in the previous year.
“One positive development was a 2.6 percent increase in the hotels and restaurants sector, influenced by a 3.3 percent rise in stay-over visitors. Available data for the first quarter of 2011 suggest that the mild recovery continued, with a modest increase in activity in the tourism and construction sectors,” said the communiqué.
The Monetary Council noted that the divergences in global growth evident in 2010 are expected to continue in 2011 and 2012, with economic activity in the emerging market economies far outpacing that in the advanced economies.
This uneven pattern of growth will have important implications for economic activity in the ECCU, given the region’s close trading links with the slower growing advanced countries, namely the USA, the UK and Canada.
Council also noted that the current elevated global prices for oil, food and other commodities could lead to inflationary pressures, retard the economic recovery in the advanced countries and adversely affect the growth prospects for the ECCU.
In these circumstances Council was informed that the ECCU is projected to grow by roughly 2 percent in 2011 and by 3 percent in 2012, with modest expansions in the major sectors, particularly, construction, hotels and restaurants, and wholesale and retail trade.
Council was updated on developments in the variables which define the monetary and credit conditions in the ECCU during the twelve months ended March 2011 and the factors contributing to these developments.
Council accordingly noted the following:
Deposits in the banking system slowed to a growth rate of 2.4 percent from a rate of 3 percent in the previous year, reflecting the continued weak economic conditions.
Total credit expanded by 0.3 percent compared with a rate of 2.1 percent in the previous twelve months also consistent with the low level of economic activity and with commercial banks becoming more risk-averse in the current environment of increased credit risk.
Commercial bank liquidity showed a steady increase during the period as the pace of deposit growth outpaced that of credit expansion.
Commercial bank lending rates continued to decline as economic activity remained subdued.
At the end of March 2011, the weighted average lending rate across the ECCU stood at 9.5 per cent, 0.3 percent lower than the rate at the end of March 2010.
The Central Bank’s net foreign assets position continued to be strong, buoyed by official grant and loan inflows for member governments as inflows from private direct investment and travel receipts continued to be below pre-crisis levels.
The ratio of gross foreign assets to demand liabilities, which represents the backing ratio for the currency, stood at 95.5 percent at the end of March 2011, well above the statutory level of 60 percent and the operational target of 80 percent.
Consumer prices continued to rise during the period under review, reflecting higher international prices for oil, food and other commodities.