CDB Gives Montserrat Economy Bright Outlook for 2019

Economic growth in Montserrat for 2018 is estimated at 1.6%, representing a reversal of the contraction of 2.8% in 2017.

The out turn was led by a significant turnaround in construction activity, supported by expansions in the real estate and the transport and storage subsectors.

Fiscal balances improved and public debt as a percentage of gross domestic product (GDP) remained negligible. Commercial bank credit to the private sector grew; and the spread between lending and deposit rates widened. The external current account remained in deficit.

The economic outlook for 2019 is positive. Output growth is projected to accelerate slightly, reaching 2.0% in 2019, and fiscal conditions should remain on par with the 2018 out turn.

However, the balance of risks to the outlook is slightly negative.

KEY DEVELOPMENTS IN 2018 Preliminary data from the Eastern Caribbean Central Bank (ECCB) show that GDP expanded by 1.6% in 2018 (see Chart 1).

The expansion was supported by a 5.0% growth in construction activity, following a decline of 33.0% in 2017. Output in the transport and storage sub˗sector rose by 7.5% on account of the improved reliability of the ferry service and increased construction activity.

Additionally, real estate activity grew by 1.5%. However, a 1.0% fall in public administration, the country’s largest contributor to GDP, acted as a drag on economic performance.

Montserrat experienced price deflation.

Based on the Consumer Prices Index (period average), prices declined by an average of 0.2% on account of price drops in all major sub-indices relative to 2017.

As at September, prices for housing, utilities, gas and fuels; transport; and food and non˗alcoholic beverages had fallen by 2.1%; 1.1%, and 0.7%, respectively.

Preliminary estimates of Central Government’s operations through to the third quarter of 2018 show a healthier fiscal position.

Provisional ECCB data indicate that the overall deficit narrowed to approximately 3.8% of GDP as at September 2018, from a 6.9% of GDP in 2017. With interest payments being marginal, the primary deficit moved in tandem with the overall balance