BASSETERRE, St. Kitts – EMANATING from the 64th Meeting of the Eastern Caribbean Central Bank (ECCB) Monetary Council, a review of the region’s money and credit performance for 2008 revealed a significant economic slowdown and indicated possible worsening once the global recession deepens.
Following the February 13 meeting, Council Chairman and Antigua’s Minister of Finance Hon. Dr. Errol Cort indicated that during 2008, there had been a fall in the liquidity position of the commercial banking system as tourist arrivals, inflows of foreign direct investment and private sector remittances were grossly affected. He stated that the sector also witnessed a fall in commercial banks’ net foreign assets as they “drew down on their external assets to finance credit beyond what the growth in deposits could facilitate”.
“Council noted that monetary and credit conditions in the Eastern Caribbean Currency Union (ECCU) during the twelve-month period ended November 2008 tightened somewhat and were characterized by an expansion in total deposits in the commercial banking system (5 %), although at a slower pace relative to the same period a year earlier (11.8 %), reflecting the slowdown in economic activity.
“Growth in credit was at a relatively brisk pace (9.3%), but considerably slower than that recorded in the previous year (23%), reflecting less favourable terms and conditions for borrowers and a weakening of business and consumer confidence during the current period according to the ECCB’s Credit Market Conditions Survey and the Business Outlook Survey.”
Dr. Cort cautioned that growth prospects for the ECCU economies would “continue to be adversely impacted by the unfolding global developments” as activity in most of the major trading partner countries is likely to slow or contract in 2009.
“The projection is for a growth rate of 0.8 percent in the ECCU for 2009 following an estimated 2.4 percent in 2008. However, inflationary pressures were likely to diminish as international commodity prices, particularly that of oil, fell and the pace of economic activity slowed.”
Cort indicated that having assessed the recent developments and the outlook for member countries, Council agreed that the key policy imperative of the Central Bank is to protect the stability of the financial system and maintain the credibility of the currency adding that money and credit must be available in sufficient quantities and at reasonable costs.
He added that Council accordingly agreed to maintain the Central Bank’s administered rates at their current levels, maintaining the minimum savings deposit rate at 3 % and the Central Bank’s discount rate at 6.5 %.
