BASSETERRE, St. Kitts & Nevis: According to the governor of the Eastern Caribbean Central Bank (ECCB), Sir K. Dwight Venner, the economies of the region have been in recession for the past three years. He said that economic activity fell by 5.7 and 2.2 per cent in 2009 and 2010 respectively, followed by a further decline of 0.6 per cent in 2011.
“Clearly, unemployment rates and poverty levels would have been negatively affected. The tourism sector performed slightly better than in the previous year with growth of 4.6 per cent being recorded but still remaining below pre-crisis levels.
“Construction activity remained low, contracting by 5.6 per cent, as public sector capital projects and private sector activity slowed.
“Output in the banana industry was severely impacted by unfavourable weather conditions which resulted in a fall of 76.6 per cent in banana receipts in 2011.”
Sir Dwight said that the performance of the manufacturing sector was also poor with a recorded 1.0 per cent contraction in growth.
“Financial sector developments were also challenging,” he said, and referred to issues in both the banking and the insurance sectors, pointing to Colonial Life Insurance Company [Trinidad] Ltd. (CLICO) and British American Insurance Company [Barbados] Ltd. (BAICO) which have both been put under judicial management.
He said the credit union sector also has its issues related to the exposure of several institutions to CLICO and BAICO and governance and financial challenges at others.
Concerning monetary variables, he said growth in credit remained below historical norms at 1.0 per cent, but this was an improvement over the 2.0 per cent decline recorded in 2010.
In contrast, non-performing loans increased, causing commercial banks to further tighten their terms and conditions; total deposits also rose by 3.0 per cent, a marginal improvement over the 2.0 per cent increase in the previous year; and currency in circulation increased by 5.0 per cent following the economic contractions of the two previous years.
“The consolidated fiscal operations of the central governments were estimated to have incurred an overall deficit of $551 million in 2011, compared with $336 million in 2010, when there was a significant increase in grants and official inflows. The performance of the governments’ revenue in the past three years shows a gradual improvement and in 2011, a 4.4 per cent increase was recorded following growth of 1.5 per cent in 2010 and a contraction of 8.0 per cent in 2009.
“Over the year, the debt-to-GDP ratio remained virtually unchanged at 83.4 per cent,” said Sir Dwight, adding that the ECCU trade balance widened by 3.0 per cent in 2011, while there was a decline in the overall balance of payments.
“ECCU governments, in order to monitor their fiscal performances, have set annual targets in relation to the primary balance and the debt-to-GDP ratio, and most countries have adopted the VAT (Value-Added Tax),” said Sir Dwight. “With respect to debt, countries have approached the Paris Club for rescheduling and some element of improvement in their credit terms. Others have engaged in debt restructuring exercises with their creditors, involving difficult discussions and negotiations, which, it is hoped, will result in an improvement in the situation for both the government and the creditors.”