BASSETERRE, St. Kitts – The Governor of the Eastern Caribbean Central Bank (ECCB), Timothy Antoine, says the growth outlook for the Eastern Caribbean Currency Union (ECCU) is positive and that the economies continue to expand while inflation is abating.
“The growth outlook remains positive across the board in the ECCU, with tourism expected to continue leading the economic recovery throughout 2024, as it did in 2023. Indeed, Tourism has rebounded to pre-pandemic levels with revenues in the first three quarters of 2023 surpassing revenues in 2019 over the same period,” the Council noted.
The communique issued at the end of the Monetary Council of the ECCB held here last weekend under the chairmanship of St. Vincent and the Grenadines Finance Minister Camillo Gonsalves, quoted Antoine as saying that implementing strategic reforms is key for building resilience and elevating the growth trajectory.
Antoine said that increased investments in areas such as food and nutrition security can build resilience against shocks.
In his report for the period January to December last year, titled “The Big Push: Implementation for Impact in an Era of Elevated Uncertainty,” Antoine provided an overview of the key risks to financial stability within the ECCU and assessed their potential impact in the near to medium term, while also focusing on the question, “What will it take to double the GDP of the ECCU?”
The Governor’s report indicated that the post-COVID global economy, which saw a better-than-expected 2023, has shown resilience that is forecast to continue into 2024.
But he warned that a slowing global economy and uncertainty portend headwinds ahead for the ECCU, particularly in tourism, which had a strong rebound in 2022 that continued into 2023.
The International Monetary Fund (IMF) forecast in its January 2024 World Economic Outlook Update that global gross domestic product (GDP) is likely to grow 3.1 per cent in 2024, unchanged from 2023.
Antoine said in the ECCU, namely Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St.Kitts and Nevis, St.Lucia and St. Vincent and the Grenadines, the growth outlook is positive, the economy continues to expand and inflation is abating.
Antoine said that monetary, credit and financial conditions in the ECCU remain stable and accommodative, as well as conducive to the stability of the currency.
He said the current backing in respect of foreign reserves is 95.13 per cent as of February 9, 2024, up from 94.8 per cent which was reported at the last ECCU meeting in November last year.
Having considered the state of monetary, financial and credit conditions in the ECCU, and on the recommendation of the Governor, the Monetary Council agreed to maintain the minimum savings rate at two per cent, as well as maintain the discount rate at three per cent for short-term credit and 4.5 per cent for long-term credit.
The Monetary Council increased the Central Bank’s discount rate by 100 basis points from two per cent to three per cent (short term), and from 3.5 per cent to 4.5 per cent (long-term credit) at last meeting held in November 2023.
The Council noted that those were the first rate hikes since the discount rate and long-term lending rate were lowered in April 2020 and February 2021, respectively.
The Minimum Savings Rate (MSR) is the lowest rate that commercial banks can offer on savings deposits. The Central Bank’s Discount Rate is the rate at which the ECCB lends to governments and commercial banks.
The ECCB Monetary Council said it was advised that the ECCU banking system remains resilient and stable, with a high degree of liquidity.
“Excess liquidity levels have been trending down as local banks manage their balances by investing overseas to take advantage of higher interest rates. Still, there remains significant excess liquidity in the banking system.”
It said although financial sector stability has been maintained, vulnerabilities persist. The Non-Performing Loans (NPL) ratios of commercial banks and credit unions remain elevated at 12.2 per cent and 7.8 per cent, well above the five per cent per cent benchmark.
The Credit Bureau, which was recently re-branded from Creditinfo ECCU Ltd to EveryData ECCU Ltd, is in the process of completing data-sharing agreements.
The Monetary Council said that soft launches are being planned for Antigua and Barbuda and St Kitts and Nevis, in the first quarter of 2024.
The ECCB initiated the ECCU Credit Bureau Project in 2017 with the objectives of strengthening credit risk management and enhancing access to credit.
The Council said that fiscal performance improved in 2023 in tandem with the economic recovery, placing the ECCU back on the path towards debt sustainability.
Given the relative volatility in Citizenship by Investment (CBI) revenue, strategic reforms are needed to facilitate a broadening of the revenue base.
The communique noted that prior to the Monetary Council meeting, members held “productive discussions” with the IMF’s Deputy managing director, Bo Li, and his delegation that “focused on climate finance – which was held against the backdrop of an increased global focus on climate change issues.
“Both the ECCB and IMF officials agreed that partnerships with international financial institutions and other stakeholders are needed to advance climate action, adaptation and finance at the regional ECCU level.
“The ECCB has already made steps towards greening the ECCU financial system, and collaborations with institutions such as the World Bank Group and NDC Partnership are bearing fruit to ensure that the right framework policies are in place,” the communique added.
