CARIBBEAN ECONOMIC REPORT IMF Real GDP Growth Statistics as at October 2015

GDP Growth % World October 2015 Advanced Economies Emerging Market and Developing Economies Latin America and the Caribbean 8.5

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4.5 IMF Cuts Global and Regional Growth Forecasts The IMF trimmed its global growth forecasts for 2015 and 2016 by 0.2 per- 2.5 centage points (pp) each, reporting that global growth this year is now ex- 0.5 pected to slip 0.3pp lower than 2014 to 3.1% in 2015, and accelerate to 3.6% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f -1.5 in 2016. According to the IMF’s World Economic Outlook (WEO) for October Source: IMF, RBC Financial (Caribbean) Limited -3.5 2015, growth in the Caribbean’s tourism-based economies will soften slightly

from 2.4% in 2014 to 2.3% in 2015 and 2016, as they continue to benefit from improved terms of trade and a recovering US and UK economy. The report Caribbean Growth Forecasts for 2015 as at October 2015 Real GDP growth % showed that a 10% real decrease in oil prices, boosts real GDP growth in the -2.0 0.5 0.5 first year by 0.2pp in tourism-based economies. This lift from lower oil prices 1.0 Curacao 1.0 1.1 would be compounded by stronger tourist arrivals and citizenship-by- 1.5 St. Lucia 1.8 investment programs, countered by the impact of easier access to Cuba by US Turks and Caicos 2.0 2.0 St. Vincent and the Grenadines 2.1 tourists, the possible competitiveness losses from real effective exchange 2.2 2.4 rate appreciation as the USD continues to strengthen, and higher US interest Cuba 2.5 2.8 3.0 rates. Growth for the Caribbean’s commodity exporters will continue decel- 3.4 St. Kitts and Nevis 5.0 erate from 2.5% in 2014, to 2% this year, rebounding to 2.5% in 2016. -2 -1 0 1 2 3 4 5 Source: IMF, S&P, various regional Central Banks, RBC Financial (Caribbean) Limited

Regional spillovers from ’s crisis According to the IMF, longstanding unsustainable macroeconomic policies in Venezuela has given rise to widespread microeconomic distortions, inflation

projected around 200% in 2015 and 2016, a chronic shortage of goods, a black market exchange rate over 100 times the lowest official exchange rate, and a deep recession. Following a 4% contraction in 2014, the IMF expects Venezue- la’s economy to shrink further by about 10% in 2015 and 6% in 2016. The Car-

ibbean’s fuel imports via PetroCaribe are expected by the IMF to show fur- ther declines in 2015, the steepest of which (as a fraction of GDP) will be in

Guyana. Moody’s reported that Venezuela’s mounting external imbalances have put pressure on investment flows to Cuba, given that Venezuela remains

Cuba’s main trade partner and source of investment. Source : IMF WEO

Aruba — Venezuela arrivals at highest level ever (CBA) data for August 2014 show inflation falling to 0.7% y-o-y, Marla Dukharan and official reserves expanding 30% y-o-y to USD760 million, which we esti- Group Economist mate at four months of imports. Stopover arrivals grew 14.8% y-o-y in August RBC Caribbean (868) 688-9845 2015 according to the CBA, driven mainly by a 50% y-o-y increase in arrivals [email protected] from Venezuela to reach 36,728 in August—the highest ever monthly total from this source market, and second only to arrivals from the US.

Non-performing Loans : The Bahamas The Bahamas — 2,000 Baha Mar related redundancies % Non-performing / Total Loans 17.5% The Central Bank’s (BCB) August 2015 report show stopover arrivals expanded 17.0%

16.5% 5% y-o-y, the average occupancy rate improved 4.3pp to 75.9%, and the aver- 16.0% age daily room rate (ADR) increased by BSD16.82 to BSD268.36. Cruise pas- 15.5%

15.0% senger arrivals fell 2.7% y-o-y however. Inflation accelerated slightly to 1.41% 14.5% y-o-y in August 2015, and after posting 29 consecutive weeks of y-o-y de- 14.0% clines, foreign reserves grew 1.5% y-o-y at the end of August 2015 to 13.5%

13.0% USD935.6 million, which we estimate at 2.5 months of imports. 2,000 Baha Jul-13 Jul-14 Jul-15 Jan-13 Apr-13 Jun-13 Oct-13 Jan-14 Apr-14 Jun-14 Oct-14 Jan-15 Apr-15 Jun-15 Sep-13 Sep-14 Feb-13 Mar-13 Feb-14 Mar-14 Feb-15 Mar-15 Aug-13 Nov-13 Dec-13 Aug-14 Nov-14 Dec-14 Aug-15 May-13 May-14 May-15 Source: Central Bank of the Bahamas, RBC Financial (Caribbean) Limited Mar employees have been made redundant, which could have an impact on

Central Bank External Reserves : The Bahamas the unemployment rate, currently at 12%, and consequently the level of non- USD Millions 1025 performing loans, which stood at 15 % of total loans in August 2015. 975 925 875 Barbados — 2015 growth forecast trimmed to 0.5% 825 The Central Bank’s (CBB) Q3 2015 report showed growth at 0.3% y-o-y, down 775

725 from 0.5% y-o-y in H1 2015. The CBB is now projecting growth at 0.5% overall 675 for 2015, down from the 2% projection announced in January. This, despite 625 stopover arrivals growing 14.5% y-o-y to Q3 2015, driven mainly by 30% more 02-Jul-12 02-Jul-13 02-Jul-14 02-Jul-15 02-Jan-13 02-Jan-14 02-Jan-15 02-Sep-12 02-Sep-13 02-Sep-14 02-Mar-13 02-Mar-14 02-Mar-15 02-Nov-12 02-Nov-13 02-Nov-14 02-May-12 02-May-13 02-May-14 02-May-15 Source: Central Bank of the Bahamas, RBC Financial (Caribbean) Limited US and 18.6% more Canadian visitors, y-o-y. In spite of stronger tourism International Reserves : Barbados flows, USD reserves fell 8% y-o-y to USD489 million in September 2015, or 14 USD '000 725,000 weeks of imports according to the CBB, as sovereign debt payments and the 675,000 subscription to the Latin American Development Bank (CAF) drove a net out- 625,000 flow of about USD89 million. Another factor possibly exerting pressure on USD 575,000 reserves is the extent to which the Government’s fiscal deficit is being fi- 525,000 nanced by the CBB. The Government’s financing needs for the first half of 475,000 the fiscal year 2014/15 (April-September) was BBD289.7 million, of which the 425,000 CBB financed 82% or BBD237.4 million, according to data in the CBB report. Jul-15 Jul-14 Jul-13 Jan-15 Apr-15 Jan-14 Apr-14 Jan-13 Apr-13 Sep-15 Sep-14 Oct-14 Jun-15 Sep-13 Oct-13 Jun-14 Jun-13 Aug-15 Aug-14 Feb-15 Mar-15 Aug-13 Feb-14 Mar-14 Feb-13 Mar-13 Nov-14 Dec-14 Nov-13 Dec-13 May-15 May-14 May-13 Source: Central Bank of Barbados, RBC Financial (Caribbean) Limited As a result, the CBB now holds just over BBD1.0 billion in Government debt— Inflation rate : Barbados roughly two-thirds in T-bills and one-third in debentures—or 8.8% of the total y-o-y inflation (%)

9.58 10

9.46 public sector debt stock of about BBD11.5 billion in September 2015. The 9.40 9.21

8.86 9 8.43

7.79 8 CBB’s holding of Government debt therefore expanded by 81% in nine 7.09 7 6.49 months, from BBD555 million in December 2014, to just over BBD1.0 billion in 5.81 6 5.12 5 4.53 September 2015, the CBB report revealed. Such activity would normally exert 3.89 4 3.50 2.96

2.63 3 inflationary pressures, but based mainly on lower commodity import prices, 2.35 2.16 2.14 2.12 2.07 1.98 1.91 1.89 1.87 1.82 1.80 1.79 1.75 1.74 1.72 1.70 1.70 1.69 1.70 1.69 1.69 1.68

1.58 2 1.38 1.20 1.04 0.82 1 inflation stood at 0.82% y-o-y in July 2015—the lowest level since October 0 2004. Unemployment averaged 12% in H1 2015, according to the CBB. Once Jul-15 Jul-14 Jul-13 Jul-12 Jan-15 Jan-14 Jan-13 Jan-12 Sep-14 Sep-13 Sep-12 Nov-14 Nov-13 Nov-12 Mar-15 Mar-14 Mar-13 Mar-12 May-15 May-14 May-13 May-12 Source: Central Bank of Barbados, RBC Financial (Caribbean) Limited again, the CBB stressed the need for declining productivity to be addressed. Employment Level : The Cayman Islands # persons employed 21,000 Caymanian Non-Caymanian 20,490

19,908 20,000 Cayman Islands — Unemployment up from 4.7% to 5.6% 19,595 19,298 According to the Economics and Statistics Office (ESO), overall unemploy- 19,000 18,588 ment increased from 4.7% in 2014 to 5.6% in ‘spring’ 2015, as unemployment 18,127 17,839 18,000 17,518 17,410 amongst Caymanians increased from 7.9% to 8.3%, and from 1.5% to 1.9% 17,144 17,000 16,493 amongst non-Caymanians. The total number of employed persons expanded

15,969 16,000 from 37,723 in 2014, to 37,900 in ’spring’ 2015. The population increased by

15,000 1.4% from 58,238 in 2014, to 59,054 in ‘spring’ 2015. 2010 2011 2012 2013 2014 Spring 2015 Source: The Cayman Islands Economics and Statistics Office, RBC Financial (Caribbean) Limited

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Cuba — Stopover arrivals up 27.4% y-o-y in September Reuters reported Cuba is late in settling foreign suppliers and external bal- ances are deteriorating due lower commodity export prices, the impact of the most severe drought in over 100 years, and softer monetary and fuel flows from Venezuela. Oil shipments have declined from 100,000bpd in 2013, to less than 70,000bpd currently, according to Moody’s, who sees Venezuela’s deterioration a credit negative for Cuba. These developments all suggest that the official 2015 growth forecast of 3.5% will likely be missed.

Curacao and St. Maarten — Q2 growth in Curacao only Net Official Reserves : Curacao and Sint Maarten NAf Millions 2,400 The Central Bank (CBCSM) announced in its Q2 2015 report that Curacao rec- 2,300 orded 0.4% real growth and St. Maarten saw a 0.6% contraction, y-o-y in Q2 2,200 2015. Growth in Curacao was driven by higher private consumption, manufac- 2,100 2,000 P r turing output, tourism activity, and public investment spending, tempered by o 1,900 v i s 1,800 lower exports. The growth in stopover arrivals was outstripped by declining i o 1,700 n a numbers from Venezuela. St. Maarten’s contraction was largely driven by l 1,600 lower stopover and cruise tourist arrivals, weaker hotels and restaurants ac- 1,500 Jul-14 Jul-15 Jan-14 Apr-14 Jan-15 Apr-15 Jun-14 Sep-14 Oct-14 Jun-15 Sep-15 Oct-15 Feb-14 Mar-14 Feb-15 Mar-15 Aug-14 Aug-15 Nov-14 Dec-14 May-14 May-15 tivity, and the spillover effects on other sectors such as wholesale and retail Source: Central Bank of Curacao and Sint Maarten, RBC Financial (Caribbean) Limited trade, transport, storage and communications. Net International Reserves : Guyana USD Millions 850

Guyana — Reserves continue to decline, FX rate stable 800

Central Bank data show reserves falling to USD607.2 million in September 750 2015, which we estimate at roughly 3.5 months of imports. 700

650 Jamaica—S&P affirms credit rating at B, outlook stable Based partly on the roughly 10pp decline in total debt / GDP as a result of 600 Jul-12 Jul-13 Jul-14 Jul-15 Jan-12 Apr-12 Jan-13 Apr-13 Jan-14 Apr-14 Jan-15 Apr-15 Jun-12 Sep-12 Oct-12 Jun-13 Sep-13 Oct-13 Jun-14 Sep-14 Oct-14 Jun-15 Sep-15 Feb-12 Mar-12 Aug-12 Dec-12 Feb-13 Mar-13 Aug-13 Dec-13 Feb-14 Mar-14 Aug-14 Dec-14 Feb-15 Mar-15 Aug-15 Nov-12 Nov-13 Nov-14 Jamaica's liability management program for its PetroCaribe debt, S&P af- May-12 May-13 May-14 May-15 Source: Bank of Guyana, RBC Financial (Caribbean) Limited firmed the rating at B, with a stable outlook. The government used USD1.5 International reserves: Suriname USD Millions 850 billion raised in the international capital market to purchase USD3.25 billion 800 owed to Venezuela under PetroCaribe. 750 700 650 Suriname — Reserves fall below USD400 million 600 550

Net international reserves have declined for 29 consecutive months, falling 500 40% y-o-y in September 2015 to just under USD400 million, which we estimate 450 400 at less than 2 months of imports, according to Central Bank data. 350 Jul-14 Jul-15 Jan-14 Apr-14 Jan-15 Apr-15 Jun-14 Oct-14 Jun-15 Sep-14 Sep-15 Feb-14 Mar-14 Aug-14 Feb-15 Mar-15 Aug-15 Nov-14 Dec-14 May-14 May-15 Source: Central Bank of Suriname, RBC Financial (Caribbean)

Trinidad and Tobago — USD price and supply increase Net Official Reserves : Trinidad and Tobago The recent FY2015/16 budget announcement, for the first time in several USD Millions 11,500 11,300 years, did not set a record for being the largest ever, and falls short of the 11,100 original FY2014/15 budget by TTD1.6 billion or 2.5%. The Government ex- 10,900 10,700 pects to earn 72% less energy revenue at TTD5.5 billion in FY2015/16 10,500 10,300

(woefully short of the usual TTD20-30 billion), and is simultaneously aiming 10,100 for a deficit of TTD2.8 billion—the lowest since FY2010/11. Growth is not 9,900 9,700 expected to exceed 1.4% for the next two years, barring a strong recovery in 9,500 Jul-15 Jul-14 Apr-15 Apr-14 Jun-15 Oct-14 Jan-15 Jun-14 Jan-14 Sep-14 Mar-15 Mar-14 Aug-15 Feb-15 Aug-14 Feb-14 Nov-14 Dec-14 May-15 energy prices, according to the budget. The number of employed persons is May-14 Source: Central Bank of Trinidad and Tobago, RBC Financial (Caribbean) Limited

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falling, having declined by 20,400 in one year to March 2015, as unemploy- ment increased to 3.7%, after having held at 3.3% throughout the latter half of 2014. The government continued the phasing-out of the fuel subsidy by increasing the prices of diesel and super gasoline by 15% each to TTD1.72 and TTD3.11 per litre respectively. This is expected to save about TTD340.0 mil- lion, but the subsidy will still cost over TTD1 billion in FY2015/16. Gross pub- lic sector debt has been expanding in the double digits y-o-y since Q4 2014. In Q2 2015, gross public sector debt grew by almost 18% y-o-y to TTD111.6 billion. An overall balance of payments deficit and a loss in official foreign reserves of USD720 million was incurred in FY2014/2015 according to the budget. As proposed in the budget, the Central Bank (CBB) announced a re- establishment of the pre-April 2015 foreign exchange distribution system. A special injection of USD500 million was made on October 30 which saw the TTD depreciate to roughly TTD6.40 : USD1.00. Total USD injections reached a record monthly high of USD695 million in October 2015, bringing the y-t-d total to just under USD2.5 billion—an increase of just over USD1.0 billion or 73% over the same period last year. CBB online data show reserves expanded 3.4% y-o-y to USD10.4 billion or 12 months of imports in August 2015.

Caribbean Economic Indicators Y-O-Y Gross Nominal GDP Public Import Y-O-Y Popl'n GDP (USD Per capita Credit Rating & change Unemp. debt/GDP cover Inflation (000) Bn) GDP (USD) (Outlook) (%) (%) (%) (months) (%) Aruba 107 2.6 24,402 BBB+ (Stable) 1.1% 7.6% 80.1% 4.1 0.7% The Bahamas 347 8.2 23,417 BBB- (Negative) 1.0% 12.0% 61.0% 2.5 1.4% Barbados 274 4.5 16,307 B (Negative) 0.3% 12.0% 134.3% 3.2 0.8% Cayman 59 3.0 54,338 Aa3 (Stable) 1.4% 5.6% 21.0% n/a -3.6% Cuba 11,300 77.1 6,848 Caa2 (Stable) 4.7% 3.5% 22.3% n/a 1.2% Curacao 143 3.0 21,247 A- (Stable) 0.4% 13.0% 37.0% 4.2 1.5% Dom Rep 10,400 60.8 5,662 BB- (Stable) 6.2% 6.0% 46.0% 3.4 0.4% ECCU 605 5.7 8,922 n/a 1.7% 20.0% 98.5% 8.0 0.8% Guyana 756 2.7 3,596 Not rated 3.2% 11.0% 65.0% 3.5 0.5% Jamaica 2,751 15.3 5,526 B (Stable) 0.6% 13.2% 125.0% 5.3 3.8% St. Maarten 43 0.8 19,333 Baa1 (Stable) -0.6% 15.0% 22.0% 4.2 1.9% Suriname 541 5.1 9,339 BB- (Stable) 4.1% 9.5% 37.8% 2.0 4.3% T&T 1,328 23.8 17,935 A (Stable) -2.0% 3.7% 60.0% 12.0 4.0%

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