REGIONAL ECONOMIC SUMMARY 2018 1 REGIONAL ECONOMIC SUMMARY 2018 Disclaimer Copyright © Caribbean Development Bank (CDB). The opinions, findings, interpretations and conclusions expressed in this publication are those of the staff of CDB and do not necessarily reflect the official policy or position of CDB, its Board of Directors, or the countries they represent. This work may be reproduced, with attribution to CDB, for any non-commercial purpose. The use of CDB's name for any purpose other than for attribution, and the use of CDB's logo shall be subject to a separate written licence agreement between CDB and the user and is not authorized as part of this licence. No derivative work is allowed. CDB does not necessarily own each component of the content contained within this document and therefore does not warrant that the use of any third-party owned individual component or part contained in this work will not infringe on the rights of those third parties. Any risks of claims resulting from such infringement rest solely with the user. CDB does not guarantee the accuracy of the data included in this work. Any dispute related to the use of the works of CDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. Nothing herein shall constitute or be deemed to constitute a waiver of the privileges and immunities of CDB, all of which are specifically reserved. 2 REGIONAL SUMMARY ECONOMIC PERFORMANCE OVERVIEW Economic performance in the Caribbean is This document contains Country Briefs for set against a background of slowing global each of the Caribbean Development Bank’s economic growth. The current international (CDB) 19 Borrowing Member Countries economic environment is characterised by (BMCs). The Country Briefs are also available escalating trade tensions, volatile commodity as separate documents. They contain CDB’s markets, and policy uncertainty with respect summary assessment of economic to both BREXIT and U.S. trade. In spite of all performance in 2018, as well as forecasts for these developments, in 2018 most of CDB’s 2019. Assessments are made on the latest BMCs recorded positive economic growth. available data at time of publication, and are Growth averaged 1.9%, an improvement on subject to revision as new data become 0.5% in 2017. The fastest growing available. economies were Grenada (5.2%), Antigua and Barbuda (3.5%) and Guyana (3.4%). For Antigua and Barbuda and some of the other BMCs that were affected by the 2017 hurricane season, reconstruction efforts contributed to their upturn. Chart 1: Real GDP Growth 6.0 5.2 5.0 4.0 3.4 3.5 3.2 2.8 3.0 2.5 2.5 2.6 2.2 2.3 1.9 2.0 1.7 1.8 2.0 1.5 1.0 0.5 0.6 0.0 -1.0 -0.6 -2.0 -2.4 -3.0 ANG BAR DOM SLU HAI JAM MON TT SUR BAH BVI BZE SKN TCI SVG CAY GUY ANT GRE Source: Central Banks, Ministries of Finance, Statistical Offices, IMF, CDB Conversely, real gross domestic product (GDP) contracted in Barbados despite modest gains in tourism, one of its key sectors. This contraction was attributed to the impact of 3 REGIONAL ECONOMIC SUMMARY 2018 fiscal consolidation and the fall in 2017 hurricanes. Tax revenues fell in construction activity. Anguilla’s economy also Anguilla, while expenditure, much of it related contracted, due to an almost 40% fall-off in to recovery, rose. In Antigua and Barbuda, visitor arrivals, following hurricane damage rising public expenditure was accompanied to the hotel stock in 2017. For the same by lower non-tax revenues, especially from reason, the British Virgin Islands experienced the Citizenship by Investment (CBI) a 50% decline in visitor arrivals. However, programme. Indeed, it was only in St. Kitts real GDP grew by over 2.0% as a result of and Nevis that CBI revenues rose, following buoyant business and financial services the launch of a new fund in late 2017. activity. In Grenada, the fiscal position continued to Most other BMCs enjoyed increased visitor improve, reflecting strengthened expenditure arrivals. Overnight visitor arrivals increased management and tax compliance. Sustained by 15% in Belize, and by about 10% in the economic growth contributed to better fiscal Cayman Islands and in Grenada. performance in Suriname and in Trinidad and Tobago. As part of the first stage of the In the commodity exporting countries, higher economic recovery plan in Barbados, debt oil production and prices drove increased restructuring and fiscal restraint helped to growth in Suriname and in Trinidad and achieve an increased primary surplus. Belize Tobago. Buoyant gold prices also benefited also recorded a primary surplus, attributable Suriname. Growth in Guyana was linked to revenue enhancement measures taken to mainly to robust construction activity, in meet the targets agreed with creditors as part advance of the beginning of commercial of its 2017 debt restructuring programme. production of oil in 2020. Rates of unemployment fell in some BMCs, but rose in others. In Jamaica, EXTERNAL PERFORMANCE unemployment fell to a record low in 2018, on the back of greater macroeconomic stability and improvements in the doing- External positions improved in most BMCs, as business environment. Across the Region, did the level of foreign reserves. The current unemployment rates were generally higher account situation improved in Suriname, and for women than for men, and the rate of Trinidad and Tobago due to higher oil and youth unemployment remained worryingly gas prices. Suriname’s external position also high, with about one in five young people benefitted from higher gold prices. This seeking but unable to find employment. helped the external reserves position to rise above the international benchmark of three months of imports. The same happened in FISCAL PERFORMANCE AND DEBT Barbados as a result of external loan disbursements. In Belize and Guyana, the level of reserves was just above three months. Fiscal performance varied across the Region. Debt as a percentage of GDP decreased in 13 BMCs, although the ratio continued to FINANCIAL SECTOR exceed the international benchmark of 60% in 11 countries. Public finances in some BMCs Generally, monetary growth increased in continued to be affected by the impacts of the 2018, consistent with domestic credit 4 REGIONAL ECONOMIC SUMMARY 2018 expansion in Barbados; Guyana; Jamaica; outlook for CDB’s BMCs is positive. CDB is Suriname; and Trinidad and Tobago. Credit projecting that real GDP growth will be 2.1%, contracted in The Bahamas and Saint Lucia. as construction, tourism, and the extractive The regional banking system remained industries, such as gold and oil, are expected relatively stable. Bank capitalisation to expand. The expectation is that all but one continued to be satisfactory, with capital of the BMCs will grow, once again led by adequacy ratios above prudential guidelines. Grenada. The rate of growth will be higher in However, some vulnerabilities persisted, with Guyana, as the country prepares for increasing levels of non-performing loans commercial oil production starting in 2020. (NPLs) in some BMCs. The one exception is Barbados, where the level of activity will remain the same. OUTLOOK Despite projections of deceleration in global economic activity, the 2019 economic Chart 2: Real GDP Growth 2019 forecasts 5.0 4.5 4.5 4.0 3.9 4.0 3.5 3.2 3.0 3.0 3.0 3.0 2.6 2.3 2.3 2.3 2.5 2.2 2.0 2.0 2.0 2.0 1.5 1.4 1.5 1.2 1.0 0.5 0.0 0.0 BAR MON SVG JAM BAH DOM TT BVI BZE HAI SUR CAY ANT SKN SLU TCI ANG GUY GRE Source: CDB The following sections provide more detail for each BMC. CDB intends to provide a brief update in the middle of 2019. 5 ANGUILLA 6 REGIONAL ECONOMIC SUMMARY 2018 $ refers to Eastern Caribbean Dollars (EC$). US$1 = EC$2.70. ANGUILLA ECONOMIC BRIEF 2018 impact of Hurricane Irma, most hotels were OVERVIEW closed during the 2017/18 peak season. While the Clayton J. Lloyd Airport reopened Anguilla’s economy contracted by 2.4% in within a week of the Hurricane, air access 2018, even as construction activity surged. through St. Maarten – a critical hub – was The impact of the passage of Hurricane Irma limited until October 2018. As at November, in 2017 was evident in the steep decline in tourist arrivals stood at 45,399, a 31% tourism arrivals and in the Government of decline from the figures for the first 11 months Anguilla’s (GOA) fiscal performance. The of the previous year. As a result, there was current, primary, and overall balances less demand for air, land and sea weakened. The fiscal imbalance was financed transportation. with an external loan and domestic resources. During the year, the debt level rose slightly Chart 1: Real GDP Growth and foreign assets dwindled. Overall 10.0 consumer prices increased marginally and private sector borrowing contracted. 5.0 The economic outlook is positive with output 0.0 projected to increase by 3.9% in 2019. The planned reconstruction of critical public -5.0 infrastructure and the recovery of the tourism RealGrowth (%) GDP industry should drive economic growth. -10.0 2013 2014 2015 2016 2017 2018 Although fiscal conditions are likely to improve as GOA’s tax administration Source: Eastern Caribbean Central Bank (ECCB), CDB. strengthens, financing gaps are expected to remain in 2019. Losses in tourism-based industries depressed spending on other economic activities. While KEY DEVELOPMENTS IN 2018 power and water supply were restored island˗wide towards the start of 2018, The economy contracted for the third demand was constrained by the low tourist consecutive year (see Chart 1).