The Eastern Caribbean Central Bank (ECCB) has
examined the three pillars - exchange rate, fiscal stability and financial
sector stability of the
Eastern Caribbean Currency Union (ECCU), which inform the analysis of money and
credit conditions.
“Council was informed that the exchange rate pillar continued to be a source of
strength and this was expected to be maintained in the short term. Council
recognised the deterioration in the fiscal stability pillar which resulted in
lower government revenues causing fiscal imbalances,” said the ECCB,” said
Central Bank Governor, Sir K. Dwight Venner in the communiqué issued at the end
of the 72nd Meeting of the Monetary Council.
Council received the Governor’s Report on Monetary and Credit Conditions in
accordance with Article 7(2) of the Eastern Caribbean Central Bank Agreement
1983.
The report outlined monetary and credit conditions in the ECCU over the quarter
ended December 2011, against the backdrop of global economic and financial
developments and provided an outlook for the near to medium term.
Council was apprised that the macroeconomic and financial conditions of the
ECCU economy continued to be impacted by the slow economic recovery in the
advanced economies. Consequently, as small open economies, the ECCU remained
vulnerable to these external shocks.
According to the communiqué, Council was apprised that the financial sector
stability pillar improved marginally during the last quarter of 2011, but
inherent weaknesses in the system persisted. Developments in this area are
being monitored closely and ongoing measures being undertaken to strengthen the
financial sector should help to stabilise the system over time and mitigate
some of the risks.
“Council was informed of the liquidity conditions at some indigenous banks
tightened, commercial banks continued to accumulate high levels of excess reserves,
credit growth to the business sector remained below historical norms as the
decline in economic activity and the uncertainty of future economic prospects
had seemingly lowered the demand for credit. However, since the third quarter,
there has been a notable concentration of commercial bank credit in the
household sector, particularly mortgages,” said the communiqué, which stated
also that public sector credit is estimated to have declined by 2.1 per cent
compared to a contraction of 7.4 percent in 2010.
“This was mainly due to an increase in |