Published On: Mon, Aug 11th, 2014

RBC Caribbean Economic Report -July 2014

RBCPORT OF SPAIN, Trinidad - Caribbean slips on 2014 UN Human Development Index -In 2013, Cuba retained the highest ranking on the UN’s HDI in the Caribbean, holding the 44th highest level of Human Development globally since 2012.

Having moved up one notch on the ranking to 100th place, Suriname is the only Caribbean country to have recorded any upward movement in its ranking in 2013. St. Lucia recorded the largest decline, slipping by four notches to 97th, while Jamaica slipped by three spots to 96th place. Four countries registered declines by one notch each in 2013—Barbados, Antigua and Barbuda, Grenada and Dominica. Although Guyana is outranked by the rest of the Caribbean, it has recorded the fastest pace of average annual HDI growth in the region, of 1.22% between 1990-2000, and 0.87% from 2000-2013. According to the UN, the highest HDI values are seen in Latin America and the Caribbean (0.740). However, while all regions are registering improvement, signs of a slowdown are particularly noticeable in the Arab States and in Latin America and the Caribbean, where average annual growth dropped by about half.

Aruba -Fiscal Budget Not Approved, Fitch Downgrades

Fitch downgraded Aruba’s sovereign credit rating by one notch to BBB- and assigned a stable outlook, based mainly on the negative impact caused by the Valero oil refinery shutdown. The fiscal deficit, according to Fitch, averaged 6.8% of GDP from 2010-13, pushing public debt up from 40% of GDP, to 60% in 2013. This has affected fiscal credibility, and confidence in the authorities to effect consolidation. Incidentally, the Netherlands has not yet approved Aruba’s fiscal budget, over concerns about fiscal deterioration.

The Bahamas -IMF Cuts 2014 Growth Forecast To 1.2%

Upon conclusion of its recent staff visit, the IMF announced that growth, estimated at 0.7% in 2013, is now expected to reach 1.2% in 2014, versus the previous forecast of 2.3% (sourced from the IMF’s World Economic Outlook database). The fiscal deficit is estimated to have narrowed to 4.5% of GDP in 2013. The Central Bank’s report for May 2014 indicated that tourism activity has softened, with air arrivals in March 2014 down 3% y-o-y. The Caribbean Tourism Organization (CTO) is reporting a 1.8% y-o-y decline in stop-over arrivals for January-February 2014. Commercial banks’ non-performing loans grew to 16.2% of total loans in May 2014. Foreign reserves continue to climb, crossing USD1 billion in May 2014, which we estimate at roughly 2.38 months of import cover. Unemployment has fallen from 15.4% to 14.3%.

Barbados -S&P Reaffirms Rating At BB-, Negative Outlook

S&P recently reported that it expects net general government debt to rise by 5% of GDP to 80% of GDP by FY ended March 2014. S&P expects no growth in 2014, but sees the fiscal deficit declining based on ongoing consolidation. The Central Bank released its H1 2014 review of the economy, which reported a 0.2% decline in stop-over arrivals for January to June 2014, y-o-y. Total imports fell by 1.4% y-o-y for H1 2014, and international reserves slipped to USD546.7MM or 15.1 weeks of import cover in June 2014. The fiscal deficit stood at 12.4% of GDP for FY 2013/14, and debt stock grew by 9% y-o-y.

The Cayman Islands -Growth Dipped To 1.2% In 2013

According to CTO data, stop-over arrivals expanded by almost 10% from January to May 2014 y-o-y. The 2013 Annual Economic Report revised up the previous 2013 growth estimate of 0.8% to 1.2%, versus 2012 growth at 1.4%. Growth in 2014 is now expected to reach 1.9%. The first fiscal surplus since FY 2006 was recorded in FY 2013, at KYD70.8MM or 2.7% of GDP.

Curaçao And St. Maarten -Stop-Over Arrivals Declining

According to the CTO, stop-over arrivals in Curacao have declined by 3.8% from January to May 2014 y-o-y. In 2013, 44% of Curacao’s stop-over arrivals came from “other” markets—dominated by Venezuela—accounting for Curacao’s largest source market growth, and pushing overall stop-over arrival growth to 4.87% in 2013. From January to May 2014, there was an 11% y-o-y decline in stop-over arrivals from “other” markets, and a 17.1% drop in stopover arrivals from the USA. According to the Central Bank, Net Official Reserves reached NAf1,566.6MM in April 2014, which we estimate at 3.35 months of import cover.

The Dominican Republic - 8.4% Rise In Stop-Over Arrivals

CTO data reveal that robust tourism sector performance continues, with stopover arrivals growing by 8.4% y-o-y in H1 2014. Positive momentum is seen across all source markets, with the strongest growth in arrivals coming from the USA, up 12.2% and “other” markets, up 10.1% y-o-y. Inflation in June 2014 came in at 3.68% y-o-y—within the Central Bank’s target of 3.5% - 5.5%.

ECCU -Growth At 0.7% In 2013, Up From 0.2% In 2012

In its recently published Annual Economic and Financial Review for 2013, the ECCB revealed provisional growth estimates of 0.7% for 2013, compared to 0.2% in 2012. Only St. Lucia, Anguilla and Montserrat are estimated to have contracted in 2013. Higher levels of FDI as well as domestic private and public investment are largely responsible for the marginal growth in output experienced by the other member states. Indeed, the only country experiencing a decline in FDI inflows in 2013, was Dominica at 22% or USD5 million, according to ECLAC. Grenada saw the largest increase in FDI in 2013 at 129% to USD78 million, (the highest level since 2009) up from USD34 million in 2012.

Guyana -Net International Reserves In Downward Trend

The level of reserves held at the Bank of Guyana posted an 11.2% y-o-y decline in May 2014, to reach USD651.3MM, which we estimate at roughly 3.2 months of import cover. Despite this external deterioration, the exchange rate has been quite stable, averaging GYD206.47 : USD1.00 in May 2014, which represents a 0.76% depreciation y-o-y.

Jamaica -JMD Slips Against USD But Reserves Expand

Bank of Jamaica’s Net International Reserves rebounded to USD1,376.13MM (or 14.6 weeks of import cover) in May 2014, which represents growth of 39.2% y-o-y, and is the highest level seen since August 2012. According to the CTO, from January to April 2014, stop-over tourist arrivals grew by 1.2% y-oy, buoyed by higher arrivals across all source markets except the USA.

Trinidad And Tobago -IMF Expects 2014 Growth At 2.3%

On June 16th 2014, the IMF concluded its Article IV consultation with T&T, and released a statement on July 9th, highlighting their view that the economy has embarked on a sustainable growth path. Some of the positive macroeconomic trends discussed included that of inflation (trending downwards partly for statistical reasons) and unemployment (which “masks sizeable underemployment in government make-work programs”) according to the release. In addition, the fiscal deficit is expected to fall to 1.5% of GDP in FY 2013/14, “largely for ad hoc reasons rather than durable improvements in revenues or expenditures” the IMF said. And finally, the external position has strengthened, but “the foreign exchange allocation system...led to fairly widespread and persistent foreign exchange shortages” the IMF reported. The IMF forecasts growth at 2.3% in 2014, falling to 2.1% in 2015.

Turks And Caicos Islands -S&P Initial Rating At BBB+

S&P’s initial rating of the Turks and Caicos islands (TCI) at BBB+ with a stable outlook, reflects the stability associated with a self-governing overseas territory of the UK. The TCI is dollarized, limiting its monetary and external flexibility. A narrow economic base and data challenges are also ratings constraints. S&P expects 3% average annual growth for the next three years, based on developments in the tourism sector. Based on fiscal surpluses, gross general government debt is expected to decline to 24% of GDP in 2014.

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