August 11, 2016
PRESS OFFICER: Raphael Anspach
Phone: +1 202 623-7100Email: MEDIA@IMF.org
On July 13, 2016, the Executive Board of the International Monetary Fund concluded the consideration of the 2016 discussion on the common policies of member countries of the Eastern Caribbean Currency Union.
The regional recovery is gaining ground, supported by continued low oil prices, strong tourism arrivals, and robust citizenship-by-investment receipts. Three failed banks have been resolved with no spillovers to the rest of the region and fiscal management has improved.
Executive Board Assessment 1
Executive Directors welcomed the authorities’ progress in addressing key challenges and the regional economic recovery, which is gradually gaining ground supported by strong external demand, low oil prices, and buoyant citizenship by investment receipts. Risks to the near term outlook are balanced, but growth in the ECCU continues to be hindered by weak competitiveness, banking sector fragilities, susceptibility to natural disasters, and large public debt. In this context, Directors encouraged the authorities to press ahead with sound macroeconomic policies and structural reforms to decisively address these issues and strengthen the conditions for robust long term growth.
Directors commended the decisive actions taken to strengthen the resilience of the banking system. In particular, they welcomed the passing of key banking legislation, and the successful resolution of three insolvent banks. With non-performing loans still elevated and credit continuing to decline, Directors stressed the importance of swift action to help banks clean up their balance sheets and resume lending. Specifically, they recommended quickly operationalizing the regional asset management company and moving ahead with regional foreclosure legislation. While Directors generally supported eliminating the minimum saving deposit rate, a few stressed the importance of accompanying this reform with measures to enhance the financial safety net and to avoid discouraging saving and reducing financial inclusion. Directors encouraged the authorities to promote consolidation within the regional indigenous banking system to strengthen its long run viability and help lower the risk of further withdrawal of correspondent banking relationships (CBRs) from the region. They agreed that efforts to strengthen frameworks for international tax cooperation and for anti-money laundering and combating the financing of terrorism should be complemented by continued engagement with international partners in order to mitigate the risk of further loss of CBRs. Directors supported further work in this area by the Fund to assist its members, and encouraged increased global cooperation to address this issue.
Directors welcomed the improvements in fiscal discipline, and emphasized that stronger action is needed to achieve the regional debt target of 60 percent of GDP by 2030. In particular, they recommended formulating detailed medium term fiscal adjustment plans and underpinning them with fiscal rules as well as continued enhancements to public finance management frameworks. Given the region’s vulnerability to natural disasters, Directors generally underscored the importance of internalizing those costs in the fiscal policy frameworks. They also encouraged the authorities to develop a strong, regionally accepted set of principles and guidelines for citizenship by investment programs in order to enhance their sustainability.
Directors noted that the quasi currency board arrangement continues to serve the ECCU well by fostering price stability, and that international reserve levels exceed most of the Fund’s reserve adequacy benchmarks. To improve international competitiveness, they encouraged the authorities to pursue structural reforms that reduce the costs of doing business. In this context, Directors commended the initiatives to reduce energy costs—particularly investments in renewable energy sources—and recommended policies to moderate labor costs, improve resilience to natural disasters, and deepen regional collaboration.
Directors recommended improving statistics and data provision in order to enhance economic analysis and better support policy making.
Directors agreed that the views they expressed today will form part of their discussions in the context of the Article IV consultations with individual ECCU members that will take place until the next Board discussion of ECCU common policies.
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ECCU: Selected Economic and Financial Indicators, 2013–21 1/ |
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Social and Demographic Indicators (ECCU-6 only) |
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Population (2013) |
Health (per 1,000 people) |
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Total (thousands) |
613.7 |
Physicians (latest weighted avg.) |
0.7 |
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Annual rate of growth, 2000−2013 (percent) |
1.7 |
Hospital beds (2011 weighted avg.) |
2.7 |
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Life expectancy at birth (years) |
74.1 |
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Population characteristics |
GDP (2015) |
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Crude birth rate (per thousand, latest weighted avg.) 16.3 |
In nominal US$ million 5,829 |
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Crude death rate (per thousand, latest weighted avg.) 7.5 Per capita 9,489 |
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Arable land (percent of land area, 2011 weighted avg.) 9.3 Area (sq. km, 2013) 2,790 |
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Prel. |
Proj. |
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2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
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(Annual percentage change) |
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National income and prices |
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Real GDP |
1.7 |
2.9 |
1.9 |
2.1 |
2.6 |
2.7 |
2.6 |
2.6 |
2.5 |
|
|
GDP deflator |
1.3 |
2.3 |
0.4 |
0.6 |
1.5 |
2.4 |
2.4 |
2.3 |
2.3 |
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|
Potential GDP growth (HP filter) |
1.1 |
1.3 |
… |
… |
… |
… |
… |
… |
… |
|
|
Consumer prices, average |
0.8 |
1.1 |
-0.9 |
-0.2 |
1.3 |
2.2 |
2.2 |
2.2 |
2.2 |
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Monetary sector |
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Liabilities to the private sector (M2) |
2.5 |
8.2 |
4.1 |
3.3 |
4.1 |
5.1 |
5.0 |
5.0 |
4.9 |
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Net foreign assets |
21.5 |
42.5 |
31.7 |
10.9 |
8.8 |
7.9 |
6.9 |
6.0 |
5.0 |
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Of which |
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Central bank |
3.9 |
20.8 |
10.6 |
5.6 |
5.4 |
5.9 |
6.1 |
5.4 |
4.2 |
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Commercial banks (net) |
299.4 |
248.9 |
101.3 |
20.4 |
14.3 |
10.9 |
8.1 |
6.9 |
6.0 |
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Net domestic assets |
-2.6 |
-3.3 |
-9.5 |
-2.1 |
0.3 |
2.6 |
3.3 |
3.9 |
4.7 |
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Of which |
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Private sector credit |
-2.7 |
-4.6 |
-4.3 |
-1.7 |
0.8 |
2.7 |
3.9 |
4.7 |
4.7 |
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(In percent of GDP) |
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Public sector |
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Primary central government balance |
0.2 |
1.4 |
0.8 |
0.9 |
2.8 |
3.0 |
2.8 |
2.9 |
2.9 |
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excl. Citizenship by Investment Prog. |
-1.8 |
-1.0 |
-1.8 |
-1.1 |
1.2 |
1.4 |
1.4 |
1.5 |
1.6 |
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Overall central government balance |
-2.8 |
-1.5 |
-2.1 |
-2.0 |
0.0 |
0.3 |
0.1 |
0.3 |
0.4 |
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excl. Citizenship by Investment Prog. |
-4.8 |
-3.8 |
-4.7 |
-4.0 |
-1.7 |
-1.4 |
-1.2 |
-1.1 |
-0.9 |
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Total revenue and grants |
27.5 |
27.8 |
28.8 |
28.8 |
28.6 |
28.3 |
27.7 |
27.5 |
27.4 |
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Total expenditure and net lending |
30.3 |
29.3 |
30.9 |
30.8 |
28.6 |
28.0 |
27.6 |
27.2 |
27.0 |
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Foreign financing |
3.1 |
0.7 |
-0.3 |
0.6 |
-0.2 |
0.0 |
0.0 |
-0.2 |
-0.7 |
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Domestic financing including arrears |
-3.3 |
-0.4 |
0.5 |
1.6 |
0.8 |
0.8 |
0.9 |
0.8 |
0.8 |
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Central government current account balance |
0.5 |
1.2 |
0.6 |
0.0 |
1.9 |
2.2 |
2.1 |
2.4 |
2.6 |
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Total public debt (end-of-period) 2/ |
85.4 |
83.5 |
81.7 |
81.7 |
78.1 |
74.7 |
71.3 |
68.0 |
64.9 |
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(Annual percentage change) |
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External sector |
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Exports, f.o.b. |
-1.2 |
-6.8 |
-3.0 |
-1.2 |
3.5 |
5.2 |
4.9 |
4.9 |
4.6 |
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Imports, f.o.b. |
4.2 |
-0.7 |
-4.0 |
-2.4 |
7.2 |
5.7 |
5.0 |
4.8 |
5.6 |
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(In percent of GDP) |
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External current account balance |
-17.1 |
-14.5 |
-12.8 |
-11.8 |
-12.9 |
-12.9 |
-13.0 |
-12.8 |
-12.9 |
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Trade balance |
-32.8 |
-31.2 |
-29.2 |
-27.6 |
-28.7 |
-28.9 |
-28.9 |
-28.8 |
-29.1 |
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Services, incomes and transfers |
15.7 |
16.7 |
16.4 |
15.8 |
15.7 |
15.9 |
15.9 |
16.0 |
16.2 |
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Of which |
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Travel |
18.0 |
18.3 |
18.4 |
18.1 |
18.0 |
18.3 |
18.3 |
18.4 |
18.7 |
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Capital and financial accounts 3/ |
17.6 |
19.0 |
14.4 |
14.6 |
14.8 |
14.5 |
13.9 |
13.2 |
12.9 |
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Of which |
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Foreign direct investment |
12.5 |
10.9 |
11.6 |
11.2 |
11.5 |
11.2 |
10.9 |
10.6 |
10.4 |
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External public debt (end-of period) |
44.7 |
43.6 |
43.0 |
42.5 |
40.1 |
37.9 |
36.1 |
34.2 |
32.2 |
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External debt service, percent of goods and nonfactor services |
8.0 |
10.1 |
6.3 |
8.3 |
9.0 |
7.8 |
7.4 |
8.8 |
5.8 |
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Of which |
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Interest |
2.9 |
3.0 |
3.4 |
3.2 |
3.2 |
2.9 |
2.8 |
2.6 |
2.5 |
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End-year gross foreign reserves of the ECCB |
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In millions of U.S. dollars |
1,169 |
1,411 |
1,560 |
1,648 |
1,736 |
1,838 |
1,949 |
2,055 |
2,141 |
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In months of current year imports of goods and services |
4.4 |
5.4 |
6.1 |
6.4 |
6.4 |
6.4 |
6.5 |
6.5 |
6.4 |
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In percent of broad money |
22.7 |
25.3 |
26.9 |
27.5 |
27.8 |
28.0 |
28.3 |
28.4 |
28.3 |
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REER (annual percentage change) |
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Trade-weighted |
-0.6 |
0.1 |
… |
… |
… |
… |
… |
… |
… |
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Competitor-weighted |
1.9 |
2.0 |
… |
… |
… |
… |
… |
… |
… |
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Customer-weighted |
-0.1 |
-0.9 |
… |
… |
… |
… |
… |
… |
… |
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Sources: Country authorities; and Fund 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. |
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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/ In Anguilla and Antigua, the baselines include banks resolution with important fiscal consolidation commitments that lower significantly the debt-to-GDP ratio over |
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the projection horizon. Additionally, in Grenada, the debt restructuring has taken place with significant impact on the debt-to-GDP ratio. |
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3/ 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.
