May 10, 2021

Short to medium-term financial fallout expected in hurricane-impacted islands

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By LK Hewlett From WINN FM

St. Kitts and Nevis (WINN); With the initial estimate of damage in the Eastern Caribbean Currency Union from hurricanes Irma and Maria at EC$4.2 billion, the Eastern Caribbean Central Bank is projecting a resultant financial fall out in the fiscal performance of the impacted countries and the overall short term economic outlook for the region.

The two category 5 hurricanes delivered direct hits to Anguilla, Barbuda and Dominica and also impacted St. Kitts and Nevis.

The hurricanes’ impact on the region’s performance was one of the leading discussion points at the ECCB’s Monetary Council video-conference meeting on Friday.

The Council noted that notwithstanding the robust growth in the ECCU in the first six months of the year relative to 2016, growth in the ECCU for 2017 is expected to decelerate as a consequence of the recent hurricanes. The revised growth forecast for 2017 is about 2 per cent down from the 3.2 per cent forecast before the hurricanes.

The Council was also apprised that there is likely to be a deterioration in the fiscal performance of Anguilla, Antigua and Barbuda and the Commonwealth of Dominica, in the short to medium term, as a direct consequence of the impact of Hurricane Irma on Anguilla and Antigua and Barbuda and Hurricane Maria on the Commonwealth of Dominica.

As a consequence, the Council noted that the hurricane affected countries may need some flexibility in their debt servicing arrangements.

Another post-hurricane situation that the ECCB is closely monitoring is the region’s banking system.

The Council said that while the banking system is stable and that capital adequacy for most banks has improved, having regard to the recent devastation caused by Hurricanes Irma and Maria, it is likely that the Non-Performing Loans (NPLs) which had been on a downward trend, will increase in the hurricane-affected countries.

ECCB staff are currently deployed with development partners, to undertake detailed Damage, Loss and Needs Assessments within affected member countries which will inform reconstruction priorities and resource mobilization.

The Council reiterated its support for and solidarity with member countries impacted by Hurricanes Irma and Maria and members reiterated their commitment to work together and support each other during this period of reconstruction and building resilience.

To enhance ECCB member countries’ resilience to handle external shocks such as natural disasters, Council agreed to advance the discussions on the establishment of a Regional Resilience Fund.

The ECCB had provided immediate financial assistance to help the affected member countries with emergency relief in the aftermath of both hurricanes.

The Bank disbursed a total of $3.25 million in grants from the ECCB’s Fiscal Reserve Tranche II for hurricane-impacted member countries- EC $1 million each was approved forAntigua and Barbuda, Anguilla and Dominica, and St. Kitts and Nevis received $250,000.

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