There is often quite some difference between perception and reality. Nowhere is this more prevalent than in the views of business persons about economic matters and forecasting of the immediate economic developments and how it will affect their businesses. Nevertheless the views of the business sector is sought formally by governments and government agencies. Others in the private sector are also interested as such views can shape the action they take. Central bankers are particularly interested as the views of the business sector will help them in planning monetary policy moves.

The Eastern Caribbean Central Bank (ECCB) undertakes a Business Outlook Survey (BOS) twice per year. The latest such survey was conducted in each of its member countries during the second quarter of 2013 and indicates that, in general, economic conditions for businesses for the period January to June 2013 deteriorated compared with the corresponding period of 2012. However, businesses in the Eastern Caribbean Currency Union (ECCU) expect an improvement in economic conditions for the second half of 2013, compared with the corresponding period in 2012.

The businesses surveyed also indicated that the terms and conditions for lending in the ECCU region were not as tight during January to June 2013 compared with the comparative period of 2012.

Looking forward. businesses indicated that the terms and conditions for lending set by the banks will tighten in the second half albeit to a lesser extent than January to June 2013. The results indicate that general business conditions in the ECCU for the period January to June 2013 deteriorated more than had been expected. Businesses are optimistic about an improvement in business conditions during the last six months of 2013. Credit conditions were considered to have tightened but to a lesser extent during the first six months of 2012.

Further easing is expected over the period July to December 2013 albeit to a lesser extent than the period January to June 2013.

During the July to December 2013 period, businesses expect their sales performance and profits to improve relative to the second half of 2012. With respect to overall exports, Antigua and Barbuda, Dominica, Grenada, Montserrat, and St Vincent and the Grenadines are optimistic about their exporting prospect during the outlook period while businesses in Anguilla, St Kitts and Nevis and Saint Lucia expect conditions to remain the same. Respondents throughout the ECCU indicate that they expect the cost of doing business to continue on an upward trajectory.

With respect to construction activity, sentiments in Dominica, Grenada Montserrat, St Kitts and Nevis and St Vincent and the Grenadines are optimistic about the outlook period while businesses in Antigua and Barbuda and Saint Lucia expect activity to remain unchanged for the projection period. Businesses in Anguilla expect construction activity to continue to decline.

First half outlook | At the ECCU level, 37.4 per cent of the businesses surveyed indicated that they anticipate that general economic conditions would improve in the first half of 2013, while 23.6 per cent expect economic conditions to deteriorate. Of the total, 39.0 per cent expect conditions to remain the same. This resulted in an overall NPI of 13.74 for the region, reflecting the overall positive business sentiment for the first half of 2013. Respondents also expressed optimism when they were asked about the economic climate within their sector survey respondents in five of the ECCU member countries are optimistic about their prospects for the first half of 2013, with positive NPIs being recorded for Grenada (60.0), Montserrat (48.0), Antigua and Barbuda (47.62), St Kitts and Nevis (20.0), and St Vincent and the Grenadines (12.50); while businesses in Saint Lucia (-66.67), Dominica (-36.0), and Anguilla (-18.75), were generally pessimistic about their prospects.

ECCU member countries | Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Anguilla and Montserrat

Related posts | Mixed views from Eastern Carib States

Image courtesy of jscreationzs/FreeDigitalPhotos.net

The eastern Caribbean is not having the best of times. Borrowings and the economic fallout flowing from the global economic crisis of 2008 have severely constrained economic activity in the region plus the member states of the ECCU share a currency that the individual countries have little control over.

In Anguilla, growth has virtually collapsed, falling from an average of 15.8 per cent between 2005 and 2007 to an average contraction of 5.5 per cent for the period 2008-2012, resulting in two local banks facing hard times with their non-performing loans escalating to levels beyond the guidelines set by the Eastern Caribbean Central Bank (ECCB) and in turn resulting in the banks not meeting their capital requirements.

According to a speech by the chief Minister of the island, “In recent times there has been great unease about the operations and performance of the two indigenous banks in Anguilla, the Caribbean Commercial Bank (Anguilla) Limited (CCB) and the National Bank of Anguilla Limited (NBA). This has given the government cause for concern. Part of this concern is due to the fact that they are the two largest financial institutions in the country, together accounting for 76.7 per cent of the total assets of the banking sector.”

The global economic and financial crisis have hit the country’s major sectors, tourism and construction and this has had a significant impact on the performance of loans to these sectors. The banks have been facing a number of challenges including poor earnings performance, declining asset quality, high levels of non-performing loans, weak corporate governance and the inability of their managements to reverse the situation.

The organs of the ECCB, the Monetary Council and the Ministerial Sub-committee on Banking, after due consideration and representations by the Government of Anguilla, which is a member of the Monetary Council and the Ministerial Sub-committee, have decided to invoke Part IIA, Article 5B of the ECCB Agreement Act 1983.

This step has not been taken lightly and extensive discussions have taken place with the Foreign and Commonwealth Office of the British Government and they too have concurred with this action.

The daily operations of the banks will be carried out by the current staff of the respective banks under the supervision and close monitoring of the ECCB with a change only in senior management and the Board. Under the guidance of the ECCB and the other institutions work will be undertaken to restore these banks to a state of normalcy.

The ECCU member governments have agreed that the three critical policy areas at this time are growth, financial stability and fiscal stability. The Chief Minister stated, “However, the efforts to attain financial and fiscal stability will not be successful unless there is some economic growth. We therefore intend to initiate discussions with the British Government on a public sector investment development programme for the long term sustainability of the Anguillan economy.”

He continued, “In terms of the private sector, as Chief Minister and Minister of Finance, I immediately recognised the fundamental weaknesses in Anguilla’s economy especially as it related to two the most important tourism projects, namely the Cap Juluca Resort Project and the Flags Luxury Properties Golf Course Resort Project both of which were mired in legal and financial difficulties and sought to get them stabilised so that they could generate the employment and economic activity expected of such large projects.”

Related posts | Mixed views from Eastern Carib States

Business expectations in the Eastern Caribbean states are mixed. That should not be too surprising as the region is in recession with negative inflation for the first three months of the year. In a business survey carried out by the EC Central Bank, 37.4 per cent of the businesses surveyed indicated that they anticipate that general economic conditions would improve in the first half of 2013, while 23.6 per cent expect economic conditions to deteriorate. Of the total, 39.0 per cent expect conditions to remain the same. This resulted in an overall net percentage indicator (NPI) of 13.74 for the region, reflecting the overall positive business sentiment for the first half of 2013. Respondents also expressed optimism when they were asked about the economic climate within their sector.

Survey respondents in five of the ECCU member countries are optimistic about their prospects for the first half of 2013 with positive NPIs being recorded for Grenada (60.0), Montserrat (48.0), Antigua and Barbuda (47.62), St Kitts and Nevis (20.0), and St Vincent and the Grenadines (12.50); while businesses in Saint Lucia (-66.67), Dominica (-36.0), and Anguilla (-18.75), were generally pessimistic about their prospects. 

Mixed sentiments | While general economic conditions are expected to improve, the sentiments expressed for the key indicators within sectors are mixed. In general, during the January to June 2013 period, businesses expect their sales performance to improve but their profits to deteriorate further relative to the first half of 2012. With respect to overall exports, businesses in six member countries expect an improvement in performance. St Vincent and the Grenadines, Anguilla, Grenada, Montserrat, St Kitts and Nevis and Saint Lucia are optimistic about their exporting prospects during the outlook period while businesses in Dominica expect exports to deteriorate. In Antigua and Barbuda businesses expect their exporting prospects to remain unchanged for the review period. Respondents indicated that they expect the cost of doing business in the ECCU to continue on an upward trajectory. With respect to construction activity performance, sentiments in Anguilla, Grenada, Montserrat and Saint Lucia are optimistic about the outlook period while businesses in Antigua and Barbuda and Dominica expect activity to remain unchanged for the review period. Businesses in St Vincent and the Grenadines expect construction activity to decline.

TRENDS IN BUSINESS SENTIMENTS & CREDIT | An analysis of business sentiments from January 2007 to June 2013 indicates that general business sentiments declined during the period 2007 to 2009, but have fluctuated thereafter. Positive sentiments were expressed for the January to June 2013 outlook period — the first time since January to June 2007.

The trend in sentiments expressed by respondents during the period from January to June 2007 to January to June 2013 reflects one of overall tightening in the terms and conditions for lending over the period with improvements seen in some periods. Sentiments were the lowest during the period July to December with an NPI -82.1 and although still negative, subsequently improved for three consecutive periods. Although the sentiments expressed are still one of overall tightening, an improvement has been seen for the last three survey periods i.e. January to June 2012 to January to June 2013.

The data was adopted from the ECCB.