- Positive economic outlook for ECCU member states
Timothy Antoine, Governor of the Eastern Caribbean Central Bank (ECCB), says the Eastern Caribbean Currency Union (ECCU) economies are growing and inflation is falling.
Tourism is predicted to lead the ECCU’s economic recovery in 2024, as it did in 2023.The Council stated that tourism receipts in the first three quarters of 2023 exceeded those in 2019 over the same period.
The communique issued after the ECCB Monetary Council held here last weekend under the chairmanship of St. Vincent and the Grenadines Finance Minister Camillo Gonsalves quoted Antoine as saying that strategic reforms create resilience and boost growth.
Antoine suggested investing more in food and nutrition stability to enhance shock resilience.
In his January-December report, “The Big Push: Implementation for Impact in an Era of Elevated Uncertainty,” Antoine analysed ECCU financial stability risks and their medium-term impact, focusing on the question of doubling the ECCU’s GDP.
According to the Governor’s report, the global economy responded well to COVID-19 and is likely to remain resilient in 2024.
He cautioned that a slowing global economy and uncertainty could hurt the ECCU, notably tourism, which rebounded in 2022 and 2023.
In its January 2024 World Economic Outlook Update, the IMF predicted a 3.1% increase in global GDP, unchanged from 2023.
According to Antoine, the ECCU countries (Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St Kitts and Nevis, St Lucia, and St Vincent and the Grenadines) have a strong growth outlook, expanding economies, and decreasing inflation.
ECCU monetary, credit, and financial conditions are steady and accommodating, supporting currency stability, according to Antoine.
On February 9, 2024, foreign reserves backing increased to 95.13 percent from the previous ECCU meeting in November of last year.
Following the Governor’s recommendation, the Monetary Council maintained the minimum savings rate at 2% and the discount rate at 3% for short-term credit and 4.5 percent for long-term credit.
The latest meeting in November 2023 saw the Monetary Council raise the Central Bank’s discount rate by 100 basis points from 2% to 3% (short term) and 3.5% to 4.5 percent (long-term credit).
The Council observed that those were the first rate hikes since April 2020 and February 2021, when the discount and long-term loan rates were cut.
The Minimum Savings Rate (MSR) is commercial banks’ lowest savings deposit rate.ECCB lends to governments and commercial banks at the Central Bank’s Discount Rate.
The ECCB Monetary Council was told the ECCU financial system is resilient and liquid.
Local banks invest internationally to take advantage of increased interest rates, reducing excess liquidity.However, the financial system has enormous excess liquidity.”
Though financial sector stability has been maintained, vulnerabilities remain. Commercial banks and credit unions had 12.2% and 7.8% NPL levels, significantly over the 5% standard.
The Credit Bureau, renamed from Creditinfo ECCU Ltd to EveryData ECCU Ltd, is finalising data-sharing agreements.
In the first quarter of 2024, the Monetary Council plans soft launches for Antigua and Barbuda and St. Kitts and Nevis.
The ECCB launched the ECCU Credit Bureau Project in 2017 to improve credit risk management and access.
The Council noted budgetary performance improved in 2023 as the economy recovered, putting the ECCU back on track for debt sustainability.
Strategic adjustments are needed to broaden Citizenship by Investment (CBI) revenue due to its instability.
Before the Monetary Council meeting, members conducted “productive discussions” with the IMF’s Deputy managing director, Bo Li, and his delegation about climate finance “amidst a global focus on climate change,” according to the communique.
“ECCB and IMF officials agreed that regional ECCU climate action, adaptation, and finance require partnerships with international financial institutions and other stakeholders.
“The ECCB has already made steps towards greening the ECCU financial system, and collaborations with institutions like the World Bank Group and NDC Partnership are yielding fruit to ensure the right framework policies,” the communique said.
