2009 Eastern Caribbean Currency Union Economic Review By Governor Eastern Caribbean Central Bank
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S Coward
By S Coward
Published on 01-Feb-10
Feb. 1, 2010 -- The beginning of 2009 was marked by the intensification of what has been called, the most significant disruption of the financial and economic systems in the advanced economies since the Great Depression.
7.4 percent contraction expected in 2009
The 2009 Eastern Caribbean Currency Union Economic Review By Sir K Dwight Venner, Governor Eastern Caribbean Central Bank - 28 January 2010
Good evening, fellow citizens.
This address takes place at the beginning of the second decade of the 21st century, a time at which we had envisaged more progress than we have currently achieved. We have arrived at this juncture humbled by the events which have occurred in the first decade, conscious of our vulnerabilities and the events which have had such a marked effect on our progress.
This evening's presentation will be divided into two parts, a review of the year 2009 and the way forward bearing in mind the significant challenges during that period and the lessons learnt about our vulnerabilities and capabilities and the strategies for pursuing our goals for the future.
The beginning of 2009 was marked by the intensification of what has been called, the most significant disruption of the financial and economic systems in the advanced economies since the Great Depression. The United States of America, our most important trading partner, experienced a significant decline in growth and increasing levels of unemployment. Major financial institutions had either failed or were being rescued and the vital auto industry was practically bankrupt necessitating public funds for its resuscitation.
The impact on the Eastern Caribbean Currency Union was transmitted through our tourism industry by the fall in the number of visitors and tourism receipts; the decline in foreign direct investment (FDI) because of the credit crunch in the United States of America, and the reduction in remittances from our nationals in metropolitan countries.
The impact on our economies has been significant. We are estimating a contraction in growth in the Currency Union of approximately 7.4 per cent in 2009, primarily due to declines in the tourism and construction sectors. The situation in the Currency Union was compounded by the collapse of the British American and CLICO insurance companies and a major run on the Bank of Antigua. These events in both the real and financial sectors severely tested our technical capacity
and administrative arrangements.
The Currency Union consists of very small states with limited fiscal space and regulatory resources and highly stretched policy capabilities. The critical lesson learnt in 2009 was the power of collective action. At the highest political level, the Prime Ministers and Ministers of Finance came together in a joint meeting of the OECS Authority and the ECCB Monetary Council on 15 and 16 January 2009 to review the situation and craft a response to the crisis. This joint meeting was subsequently institutionalised and convened again in July 2009 to follow up on the decisions made in January. The joint meeting also hosted a public video conference across the Currency Union to update the public on the efforts to address the crisis.
The ECCB intervened on directives from the Monetary Council to address the Bank of Antigua situation with the Monetary Council being involved in an extraordinary series of meetings by videoconference and face-to-face to effect a successful rescue of the Bank. Five (5) indigenous banks collaborated in the effort extending the concept of collective action into the financial and private sectors. With respect to developments in the insurance sector, a subcommittee of the Monetary Council was established to deal specifically with this issue and has crafted a possible resolution to the matter which is being vigorously pursued.
Two other areas of concern in the financial sector surfaced during the year. Firstly, initiatives by the G20 and the OECD to impose new and punitive arrangements on
offshore financial centres, which could have a serious and negative impact on the flow of foreign investment and the relations between financial institutions in the Currency Union and those in our major trading partners. Secondly, the need for legislation covering the regulation of the credit union sector to ensure its stability and reduce the possibility of contagion throughout the financial sector. Two subcommittees of the Monetary Council have been established to manage these issues.
During the course of 2009 a tremendous amount of work has gone into two (2) specific initiatives.
The first was the creation of an OECS Economic Union to formalise the obvious success of the collective action which characterised the response to the crisis
and the second was the specific elaboration of an Eight Point Stabilisation and Growth Programme to address the current and future issues needed for our economic and social advancement.
An Economic Union Task Force established by the OECS Authority working closely with the OECS Secretariat and member countries crafted a new Treaty, building on the original Treaty of Basseterre. Heads of governments signed the new Treaty at a formal ceremony on the 29th of December 2009. The prospects of a full and complete Economic Union will formalise and deepen the process of collective action.
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Good evening, fellow citizens.
This address takes place at the beginning of the second decade of the 21st century, a time at which we had envisaged more progress than we have currently achieved. We have arrived at this juncture humbled by the events which have occurred in the first decade, conscious of our vulnerabilities and the events which have had such a marked effect on our progress.
This evening's presentation will be divided into two parts, a review of the year 2009 and the way forward bearing in mind the significant challenges during that period and the lessons learnt about our vulnerabilities and capabilities and the strategies for pursuing our goals for the future.
The beginning of 2009 was marked by the intensification of what has been called, the most significant disruption of the financial and economic systems in the advanced economies since the Great Depression. The United States of America, our most important trading partner, experienced a significant decline in growth and increasing levels of unemployment. Major financial institutions had either failed or were being rescued and the vital auto industry was practically bankrupt necessitating public funds for its resuscitation.
The impact on the Eastern Caribbean Currency Union was transmitted through our tourism industry by the fall in the number of visitors and tourism receipts; the decline in foreign direct investment (FDI) because of the credit crunch in the United States of America, and the reduction in remittances from our nationals in metropolitan countries.
The impact on our economies has been significant. We are estimating a contraction in growth in the Currency Union of approximately 7.4 per cent in 2009, primarily due to declines in the tourism and construction sectors. The situation in the Currency Union was compounded by the collapse of the British American and CLICO insurance companies and a major run on the Bank of Antigua. These events in both the real and financial sectors severely tested our technical capacity
and administrative arrangements.
The Currency Union consists of very small states with limited fiscal space and regulatory resources and highly stretched policy capabilities. The critical lesson learnt in 2009 was the power of collective action. At the highest political level, the Prime Ministers and Ministers of Finance came together in a joint meeting of the OECS Authority and the ECCB Monetary Council on 15 and 16 January 2009 to review the situation and craft a response to the crisis. This joint meeting was subsequently institutionalised and convened again in July 2009 to follow up on the decisions made in January. The joint meeting also hosted a public video conference across the Currency Union to update the public on the efforts to address the crisis.
The ECCB intervened on directives from the Monetary Council to address the Bank of Antigua situation with the Monetary Council being involved in an extraordinary series of meetings by videoconference and face-to-face to effect a successful rescue of the Bank. Five (5) indigenous banks collaborated in the effort extending the concept of collective action into the financial and private sectors. With respect to developments in the insurance sector, a subcommittee of the Monetary Council was established to deal specifically with this issue and has crafted a possible resolution to the matter which is being vigorously pursued.
Two other areas of concern in the financial sector surfaced during the year. Firstly, initiatives by the G20 and the OECD to impose new and punitive arrangements on
offshore financial centres, which could have a serious and negative impact on the flow of foreign investment and the relations between financial institutions in the Currency Union and those in our major trading partners. Secondly, the need for legislation covering the regulation of the credit union sector to ensure its stability and reduce the possibility of contagion throughout the financial sector. Two subcommittees of the Monetary Council have been established to manage these issues.
During the course of 2009 a tremendous amount of work has gone into two (2) specific initiatives.
The first was the creation of an OECS Economic Union to formalise the obvious success of the collective action which characterised the response to the crisis
and the second was the specific elaboration of an Eight Point Stabilisation and Growth Programme to address the current and future issues needed for our economic and social advancement.
An Economic Union Task Force established by the OECS Authority working closely with the OECS Secretariat and member countries crafted a new Treaty, building on the original Treaty of Basseterre. Heads of governments signed the new Treaty at a formal ceremony on the 29th of December 2009. The prospects of a full and complete Economic Union will formalise and deepen the process of collective action.
DOWNLOAD FULL DOCUMENT