July 22, 2015
IMF COMMUNICATIONS DEPARTMENT |
| Media Relations |
|---|
| E-mail: media@imf.org |
| Phone: 202-623-7100 |
On June 15, 2015, the Executive Board of the International Monetary Fund (IMF) concluded the 2015 discussion on the common policies of member countries of the Eastern Caribbean Currency Union (ECCU).
The regional economy is recovering slowly, with average real GDP growth projected at 2.0 percent in 2015, above the estimated 1.7 percent for 2014. Inflation is projected to remain subdued in 2015 on the back of moderating oil and food prices. In 2014, the fiscal stance was neutral on average, with the cyclically-adjusted primary balance unchanged. At the same time, external sector performance improved with the current account deficit estimated to have narrowed to an average of about 16 percent of GDP. Risks to the outlook remain elevated, stemming from the vulnerabilities in the financial sector and member countries’ fiscal conditions.
Executive Board Assessment1
Executive Directors noted that the economic recovery across the Eastern Caribbean Currency Union (ECCU) is gaining momentum on the back of stronger tourist arrivals and low oil prices. However, Directors highlighted significant policy challenges for the period ahead, arising from weak competitiveness, banking sector stress, and slim policy buffers in many member countries. Accordingly, Directors encouraged the authorities to take advantage of the favorable external conditions to tackle remaining vulnerabilities, paving the way for robust and inclusive growth in the long run.
Directors commended the authorities for the progress thus far in implementing their regional bank resolution strategy. They noted that key legislation has been passed in nearly all countries and that bank diagnostic exercises to develop restructuring options for troubled banks are being finalized. They encouraged the authorities to move expeditiously to restore weak banks to soundness in a coordinated manner and in a way that minimizes fiscal costs and supports regional financial stability. More broadly, Directors recommended putting in place contingency plans to support public confidence in financial institutions.
Directors noted that fiscal discipline has improved in the region. Nonetheless, they concurred that it will be important to intensify consolidation efforts since public debt ratios are projected to remain high in many cases under current policies. In particular, many Directors encouraged member countries to reach the ECCU debt target ahead of the 2030 deadline in order to build adequate policy space as soon as possible. A few Directors, however, supported a more gradual consolidation, tailored to country circumstances, to avoid undermining the rebound underway.
Directors agreed that fiscal adjustment should reflect the need to scale back tax concessions, continue to restrain the wage bill, reform the social security system, and improve the performance of state owned enterprises. Deeper regional collaboration in public service delivery could further mobilize budgetary savings. Directors also saw merit in the adoption of fiscal rules to anchor long term fiscal policy and in additional steps to strengthen public financial management, including as regards revenues from citizenship by investment programs.
Directors encouraged the authorities to pursue deeper structural reforms to improve the business environment and boost external competitiveness. Taking note of the staff assessment that the exchange rate appears to be overvalued in real effective terms, albeit to different degrees across countries and methodologies, Directors highlighted the need for reforms in the energy and labor markets, as well as steps to improve intra regional connectedness, to further promote the tourism sector and the resilience of the economy.
Directors stressed to national and regional authorities the importance of improving statistics and data provision in order to enhance economic analysis and better support policy making.
| ECCU: Selected Economic and Financial Indicators, 2012–20 1/ | ||||||||||||||||||||||||||||
| Social and Demographic Indicators (ECCU-6 only) | ||||||||||||||||||||||||||||
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Population (2013) |
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Health (per 1,000 people) |
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Total (thousands) |
613.7 |
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Physicians (latest) |
0.7 | ||||||||||||||||||||||||
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Annual rate of growth, 2000−2013 (percent) |
1.7 |
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Hospital beds (2011) |
2.7 | ||||||||||||||||||||||||
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Life expectancy at birth |
74.1 | ||||||||||||||||||||||||
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Population characteristics |
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GDP (2014) |
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Crude birth rate (per thousand, latest weighted avg.) |
16.3 |
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In nominal US$ millions |
5,575 | ||||||||||||||||||||||||
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Crude death rate (per thousand, latest weighted avg.) |
7.5 |
Per capita |
9,084 | |||||||||||||||||||||||||
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Arable land (percent of land area, 2011 weighted avg.) |
9.3 |
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Area (sq. km, 2013) |
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2,790 | |||||||||||||||||||||
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Prel. | Proj. | ||||||||||||||||||||||||||
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2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||||||
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(Annual percentage change) | |||||||||||||||||||||||||||
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National income and prices |
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Real GDP |
0.3 | 1.1 | 1.7 | 2.0 | 2.2 | 2.3 | 2.4 | 2.5 | 2.5 | |||||||||||||||||||
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GDP deflator |
2.4 | 1.3 | 1.8 | 1.3 | 2.0 | 2.0 | 2.1 | 2.1 | 2.1 | |||||||||||||||||||
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Potential GDP growth (HP filter) |
0.8 | 1.0 | 1.1 | … | … | … | … | … | … | |||||||||||||||||||
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Consumer prices, average |
2.8 | 0.8 | 0.8 | 1.0 | 1.7 | 1.9 | 2.1 | 2.1 | 2.1 | |||||||||||||||||||
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Monetary sector |
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Liabilities to the private sector (M2) |
4.1 | 4.7 | 5.9 | 4.0 | 4.2 | 4.3 | 4.6 | 4.8 | 4.8 | |||||||||||||||||||
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Net foreign assets |
29.3 | 31.2 | 42.5 | 26.5 | 15.6 | 11.8 | 9.8 | 7.8 | 5.6 | |||||||||||||||||||
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Of which |
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Central bank |
11.5 | 3.9 | 20.8 | 14.7 | 7.9 | 7.7 | 8.3 | 7.2 | 4.3 | |||||||||||||||||||
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Commercial banks (net) |
43.2 | 187.7 | 248.9 | 65.4 | 33.2 | 19.3 | 12.4 | 8.7 | 7.7 | |||||||||||||||||||
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Net domestic assets |
-0.7 | -1.9 | -6.3 | -7.5 | -3.7 | -1.9 | -0.3 | 1.6 | 3.8 | |||||||||||||||||||
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Of which |
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Private sector credit |
1.3 | -2.3 | -4.3 | -2.8 | -0.5 | 1.0 | 2.2 | 3.6 | 4.6 | |||||||||||||||||||
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(In percent of GDP) | |||||||||||||||||||||||||||
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Public sector |
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Primary central government balance |
-0.4 | 0.1 | 0.9 | -1.8 | 1.1 | 1.1 | 1.1 | 1.2 | 1.2 | |||||||||||||||||||
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excl. Citizenship by Investment Prog. |
… | -1.9 | -1.7 | -3.4 | -0.1 | 0.1 | 0.2 | 0.3 | 0.3 | |||||||||||||||||||
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Overall central government balance |
-3.5 | -2.9 | -2.0 | -4.9 | -2.1 | -2.1 | -2.1 | -2.0 | -2.1 | |||||||||||||||||||
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excl. Citizenship by Investment Prog. |
… | -4.9 | -4.6 | -6.5 | -3.4 | -3.1 | -3.0 | -2.9 | -2.9 | |||||||||||||||||||
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Total revenue and grants |
25.8 | 27.4 | 28.2 | 26.3 | 26.2 | 26.0 | 25.8 | 25.9 | 25.8 | |||||||||||||||||||
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Total expenditure and net lending |
29.4 | 30.3 | 30.2 | 31.3 | 28.3 | 28.1 | 28.0 | 27.9 | 27.9 | |||||||||||||||||||
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Foreign financing |
1.1 | 2.8 | 1.1 | 1.0 | 0.5 | 0.6 | 1.0 | 1.1 | 1.1 | |||||||||||||||||||
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Domestic financing including arrears |
1.9 | -0.3 | 0.1 | 0.5 | 0.7 | 0.7 | 0.9 | 0.8 | 0.9 | |||||||||||||||||||
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Central government current account balance |
-0.6 | 0.4 | 0.9 | -2.1 | 0.8 | 1.0 | 0.9 | 1.1 | 1.1 | |||||||||||||||||||
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Total public debt (end-of-period) |
85.6 | 85.3 | 84.3 | 85.4 | 84.2 | 82.2 | 80.8 | 79.4 | 78.1 | |||||||||||||||||||
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(Annual percentage change) | |||||||||||||||||||||||||||
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External sector |
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Exports, f.o.b. |
7.7 | -0.6 | 1.7 | 3.1 | 3.9 | 4.3 | 4.1 | 3.9 | 3.9 | |||||||||||||||||||
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Imports, f.o.b. |
0.4 | 1.9 | 2.6 | 0.4 | 3.1 | 4.5 | 4.6 | 4.4 | 4.4 | |||||||||||||||||||
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(In percent of GDP) | |||||||||||||||||||||||||||
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External current account balance |
-17.2 | -16.8 | -16.0 | -15.0 | -14.5 | -14.3 | -14.2 | -14.1 | -13.9 | |||||||||||||||||||
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Trade balance |
-31.7 | -31.8 | -31.6 | -30.5 | -30.1 | -30.2 | -30.2 | -30.1 | -30.0 | |||||||||||||||||||
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Services, incomes and transfers |
14.6 | 15.0 | 15.6 | 15.4 | 15.6 | 15.8 | 16.0 | 16.0 | 16.1 | |||||||||||||||||||
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Of which |
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Travel |
17.9 | 18.0 | 18.8 | 18.8 | 19.1 | 19.4 | 19.6 | 19.8 | 19.9 | |||||||||||||||||||
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Capital and financial accounts 2/ |
18.1 | 17.3 | 20.6 | 18.9 | 17.4 | 17.0 | 16.8 | 16.2 | 15.2 | |||||||||||||||||||
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Of which |
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Foreign direct investment |
9.6 | 11.6 | 12.0 | 11.8 | 11.2 | 10.9 | 10.5 | 10.2 | 9.9 | |||||||||||||||||||
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External public debt (end-of period) |
41.7 | 44.5 | 44.1 | 43.4 | 42.4 | 40.5 | 39.3 | 38.4 | 37.6 | |||||||||||||||||||
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External debt service, percent of goods and nonfactor services |
10.6 | 8.0 | 9.8 | 10.4 | 10.8 | 9.9 | 8.6 | 8.1 | 9.2 | |||||||||||||||||||
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Of which |
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Interest |
3.2 | 2.8 | 3.0 | 3.2 | 3.4 | 3.3 | 3.2 | 3.2 | 3.2 | |||||||||||||||||||
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End-year gross foreign reserves of the ECCB |
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In millions of U.S. dollars |
1,125 | 1,169 | 1,411 | 1,618 | 1,746 | 1,880 | 2,035 | 2,181 | 2,276 | |||||||||||||||||||
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In months of current year imports of goods and services |
4.4 | 4.4 | 5.2 | 5.9 | 6.1 | 6.3 | 6.5 | 6.7 | 6.7 | |||||||||||||||||||
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In percent of broad money |
22.9 | 22.7 | 25.9 | 28.5 | 29.5 | 30.5 | 31.5 | 32.3 | 32.1 | |||||||||||||||||||
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REER (annual percentage change) |
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Trade-weighted |
3.3 | -0.6 | 0.4 | … | … | … | … | … | … | |||||||||||||||||||
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Competitor-weighted |
0.8 | 1.9 | 2.3 | … | … | … | … | … | … | |||||||||||||||||||
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Customer-weighted |
1.1 | -0.2 | -0.7 | … | … | … | … | … | … | |||||||||||||||||||
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Sources: Country authorities; and IMF staff estimates and projections. |
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1/ Data as of May 12, 2015. Includes all eight ECCU members unless otherwise noted. ECCU price aggregates are calculated as weighted averages of individual country data. Other ECCU aggregates are calculated as sum of individual country data; ratios to GDP are then calculated by dividing this sum by the aggregated GDP. | ||||||||||||||||||||||||||||
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2/ Includes errors and omissions. |
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1 At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
