- Home
- Economy, Trade & Investment
- Antigua's Finance Minister Presents Billion Dollar Budget
Antigua's Finance Minister Presents Billion Dollar Budget
- By S Coward
- Published 01-Dec-09
- Economy, Trade & Investment
- Unrated
........
Financial sector remains robust
2010 Budget Statement: Harold Lovell, Minister of Finance, the Economy and Public Administration, Antigua and Barbuda
Madam Speaker
The year 2008 was an extremely challenging year. We saw unprecedented increases in the international price of oil, an escalation in the prices of basic food items and raw materials, a meltdown in the major financial markets, massive job losses in many industrial economies, and a slowdown in economic growth that many pundits compare to the Great Depression of the 1930s.
While there may have been a number of contributing factors, there is general agreement among economists and financial analysts that at the root of this economic dilemma was an out of control real estate sector in the United States, which ultimately gave birth to the global financial crisis. Notwithstanding this hindsight consensus as to the underlying cause of the crisis, very few people predicted the scope and depth of the economic recession that would ensue in 2009. At the
end of 2008 the IMF had forecast world output to expand by 2.1 percent in 2009. However, world output is expected to decline by 1.1 percent in 2009. Similarly, in December 2008 advanced economies were projected to decline by 0.4 percent. Actual data showed a much steeper decline of 3.4 percent in output.
Madam Speaker
When we look at the growth performance of individual advanced economies in 2009, particularly for a number of Antigua and Barbuda’s trading partners, these economies are recording sharper declines in output than was initially projected at the end of 2008. For example, in the United States a decline of 0.6 percent was initially projected compared with a revised contraction of 2.7 percent. In the United Kingdom, output is now estimated to contract by 4.4 percent compared to
earlier estimates of 1.9 percent. A similar comparison can be made for Canada, Japan and a number of European and South American countries.
Madam Speaker
I make this comparison to highlight the scope and the depth of the recession and to indicate that not even some of the brightest minds in this world foresaw the crippling effects that a disturbance in a segment of the US housing market could have on global output. I also make the point to dismiss the propaganda being promulgated by some members of this Honourable House. They claim that this government knew or should have known the extent to which the financial
crisis would affect the economy of Antigua and Barbuda and deliberately withheld this information from the people of this country.
Madam Speaker
Small Island Developing States (SIDS) are characterized as having open economies and this reflects their degree of integration into the global economy. This being the case, these economies are not insulated from the effects of this global phenomenon. The effects of this global crisis are transferred to developing economies through a number of different channels.
One of the consequences of the economic recession in advanced economies is the increased level of unemployment and the resulting decrease in the demand for goods and services exported by developing countries. This has had a negative influence on the volume and value of trade between advanced and developing economies and the volume of remittances flowing to developing countries in 2009. Additionally, the downturn in advanced economies, as well as the
decline in financial markets, significantly affected the flow of foreign direct investment (FDI) and equity investment to developing countries.
There is evidence that in 2009 FDI flows to developing countries for hotel construction declined by approximately 95.0 percent. In the midst of this financial crisis commercial lending to banks in developing economies to boost liquidity for day-to-day operations and credit expansion also declined. The overall effect of this is a more conservative approach to spending by consumers and credit expansion by financial institutions, which further compounded the negative effects of the crisis and depressed growth prospects.
The growth performance of developing countries in general and Caricom countries in particular in 2009 was negatively influenced by a number of the factors mentioned above. The declines in FDI and travel receipts had a devastating impact on the tourism industry and construction sector. Consistent with the contraction in tourism and construction, declines in output were also recorded for a number of the other service sectors including “transportation”, “communication”, “wholesale and retail trades” and “banking and insurance”. The economy of Barbados, for example, is projected to decline by more than 3.0 percent in 2009. Similarly, declines in GDP are expected for Jamaica (4.0 percent), Bahamas (3.5 percent) and Trinidad and Tobago (1.0 percent).
With respect to the OECS sub-region, all countries are projecting declines in output in 2009 except for Dominica, where it is expected that output will remain unchanged compared with the outturn for 2008. In Anguilla output is estimated to contract by 22.0 percent. Economic output in Antigua and Barbuda is projected to decline by 6.7 percent. Decreases in output are also projected for St Kitts and Nevis (8.5 percent), Grenada (5.0 percent), St Lucia (3.8 percent) and St Vincent and the Grenadines (0.2 percent).
MONEY AND CREDIT IN ANTIGUA AND BARBUDA
Madam Speaker:
The financial sector continues to show signs of remaining robust notwithstanding declines in the real sectors of the economy. Data for the period January to September 2009 show that the money supply remained stable at $2.98 billion relative to the level at the end of December 2008. The decline of 19.8 percent in the narrow money supply which includes demand deposits and currency in circulation, was offset by a 54.0 percent increase in private sector foreign currency
deposits and growth of 5.3 percent in private sector savings deposits. This indicates that there is money in the system but businesses are understandably cautious in the current environment.
During the period under review credit to the private sector declined by 0.8 percent. While credit to households decreased by 17.5 percent, lending to businesses increased by 0.4 percent. The allocation of credit by economic activity was mixed but the overall decline of 1.7 percent mirrored movements in the real sector. The increases in credit for tourism (9.4 percent), distributive trades (5.2 percent) and the acquisition of property (2.9 percent) were offset by decreases in lending for manufacturing (14.1 percent), construction (10.3 percent) and durable consumer goods (6.3 percent).
The net foreign assets of the banking system contracted by 6.1 percent to $516.9 million, reflecting a decline in Antigua and Barbuda’s imputed share of the Central Bank’s reserves. Commercial bank activity resulted in a 1.4 percent increase in their net external assets position. This was largely associated with a build-up of assets and a reduction of liabilities in banks and other financial institutions in other ECCB territories.
DOWNLOAD FULL DOCUMENT
Madam Speaker
The year 2008 was an extremely challenging year. We saw unprecedented increases in the international price of oil, an escalation in the prices of basic food items and raw materials, a meltdown in the major financial markets, massive job losses in many industrial economies, and a slowdown in economic growth that many pundits compare to the Great Depression of the 1930s.
While there may have been a number of contributing factors, there is general agreement among economists and financial analysts that at the root of this economic dilemma was an out of control real estate sector in the United States, which ultimately gave birth to the global financial crisis. Notwithstanding this hindsight consensus as to the underlying cause of the crisis, very few people predicted the scope and depth of the economic recession that would ensue in 2009. At the
end of 2008 the IMF had forecast world output to expand by 2.1 percent in 2009. However, world output is expected to decline by 1.1 percent in 2009. Similarly, in December 2008 advanced economies were projected to decline by 0.4 percent. Actual data showed a much steeper decline of 3.4 percent in output.
Madam Speaker
When we look at the growth performance of individual advanced economies in 2009, particularly for a number of Antigua and Barbuda’s trading partners, these economies are recording sharper declines in output than was initially projected at the end of 2008. For example, in the United States a decline of 0.6 percent was initially projected compared with a revised contraction of 2.7 percent. In the United Kingdom, output is now estimated to contract by 4.4 percent compared to
earlier estimates of 1.9 percent. A similar comparison can be made for Canada, Japan and a number of European and South American countries.
Madam Speaker
I make this comparison to highlight the scope and the depth of the recession and to indicate that not even some of the brightest minds in this world foresaw the crippling effects that a disturbance in a segment of the US housing market could have on global output. I also make the point to dismiss the propaganda being promulgated by some members of this Honourable House. They claim that this government knew or should have known the extent to which the financial
crisis would affect the economy of Antigua and Barbuda and deliberately withheld this information from the people of this country.
Madam Speaker
Small Island Developing States (SIDS) are characterized as having open economies and this reflects their degree of integration into the global economy. This being the case, these economies are not insulated from the effects of this global phenomenon. The effects of this global crisis are transferred to developing economies through a number of different channels.
One of the consequences of the economic recession in advanced economies is the increased level of unemployment and the resulting decrease in the demand for goods and services exported by developing countries. This has had a negative influence on the volume and value of trade between advanced and developing economies and the volume of remittances flowing to developing countries in 2009. Additionally, the downturn in advanced economies, as well as the
There is evidence that in 2009 FDI flows to developing countries for hotel construction declined by approximately 95.0 percent. In the midst of this financial crisis commercial lending to banks in developing economies to boost liquidity for day-to-day operations and credit expansion also declined. The overall effect of this is a more conservative approach to spending by consumers and credit expansion by financial institutions, which further compounded the negative effects of the crisis and depressed growth prospects.
The growth performance of developing countries in general and Caricom countries in particular in 2009 was negatively influenced by a number of the factors mentioned above. The declines in FDI and travel receipts had a devastating impact on the tourism industry and construction sector. Consistent with the contraction in tourism and construction, declines in output were also recorded for a number of the other service sectors including “transportation”, “communication”, “wholesale and retail trades” and “banking and insurance”. The economy of Barbados, for example, is projected to decline by more than 3.0 percent in 2009. Similarly, declines in GDP are expected for Jamaica (4.0 percent), Bahamas (3.5 percent) and Trinidad and Tobago (1.0 percent).
With respect to the OECS sub-region, all countries are projecting declines in output in 2009 except for Dominica, where it is expected that output will remain unchanged compared with the outturn for 2008. In Anguilla output is estimated to contract by 22.0 percent. Economic output in Antigua and Barbuda is projected to decline by 6.7 percent. Decreases in output are also projected for St Kitts and Nevis (8.5 percent), Grenada (5.0 percent), St Lucia (3.8 percent) and St Vincent and the Grenadines (0.2 percent).
MONEY AND CREDIT IN ANTIGUA AND BARBUDA
Madam Speaker:
The financial sector continues to show signs of remaining robust notwithstanding declines in the real sectors of the economy. Data for the period January to September 2009 show that the money supply remained stable at $2.98 billion relative to the level at the end of December 2008. The decline of 19.8 percent in the narrow money supply which includes demand deposits and currency in circulation, was offset by a 54.0 percent increase in private sector foreign currency
deposits and growth of 5.3 percent in private sector savings deposits. This indicates that there is money in the system but businesses are understandably cautious in the current environment.
During the period under review credit to the private sector declined by 0.8 percent. While credit to households decreased by 17.5 percent, lending to businesses increased by 0.4 percent. The allocation of credit by economic activity was mixed but the overall decline of 1.7 percent mirrored movements in the real sector. The increases in credit for tourism (9.4 percent), distributive trades (5.2 percent) and the acquisition of property (2.9 percent) were offset by decreases in lending for manufacturing (14.1 percent), construction (10.3 percent) and durable consumer goods (6.3 percent).
The net foreign assets of the banking system contracted by 6.1 percent to $516.9 million, reflecting a decline in Antigua and Barbuda’s imputed share of the Central Bank’s reserves. Commercial bank activity resulted in a 1.4 percent increase in their net external assets position. This was largely associated with a build-up of assets and a reduction of liabilities in banks and other financial institutions in other ECCB territories.
DOWNLOAD FULL DOCUMENT
