ECCU faces ‘slow recovery’
WASHINGTON -The International Monetary Fund (IMF) says the Eastern Caribbean Currency Union (ECCU) faces a protracted recovery after being hit hard by the global economic downturn.
The IMF said growth in the ECCU, which remained subdued in 2010, was expected to recover “only slowly” in 2011.
The ECCU groups most of the nine-member states of Organisation of Eastern Caribbean States (OECS).
It said inflation, which declined sharply to an average of 0.8 per cent in 2009, reflecting the widening output gap and falling prices of imported food and energy, is expected to revert gradually to its long run average of about 2two per cent given the anchor of the currency peg.
The IMF said the overall fiscal deficit has increased sharply, while extremely high and rising regional public debt in the context of a regional currency board arrangement has “exacerbated the region’s vulnerability to shocks”.
After concluding its 2010 Discussion on Common Policies of ECCU member-countries, the IMF said the global financial and economic crisis has also “exposed areas of significant weaknesses, notwithstanding reforms implemented by a number of member-countries.
“The growing fiscal deficits, unsustainable debt levels, and stress in the financial sector need to be addressed forcefully to maintain confidence in the currency union and the currency board,” it said.
But the IMF said it was “encouraged by the authorities’ commitment to implement comprehensive measures to stabilise the fiscal and financial sectors and put the ECCU economies on a more sustainable growth path”. (CMC)