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Antigua and Barbuda economy expands moderately

Economic activity in Antigua and Barbuda is estimated to have expanded at a moderate pace in the first half of 2013, compared with the performance in the corresponding period of 2012.

The improvement in economic activity was evident in positive growth in the construction; public administration, defence, and compulsory social security, transport, storage and communications; and financial intermediation sectors. Lower activity was recorded in the hotels and restaurants and wholesale and retail trade sectors. Consumer prices rose by 0.6 per cent, on an end-of-period basis, a slower rate of growth than the corresponding period of 2012. In the external sector, the merchandise trade deficit is estimated to have decreased marginally due to an increase in export value. The fiscal operations of the central government resulted in a larger overall deficit as revenue collections fell. Total outstanding public sector debt increased during the first half of 2013. In the banking system, monetary liabilities and net foreign assets increased while domestic credit declined. Commercial bank liquidity improved and the weighted average interest rate spread between loans and deposits narrowed.

In its June 2013 World Economic Outlook the IMF cut its forecast for global economic growth citing factors such as appreciably weaker domestic demand and slower growth in several key emerging market economies, as well as continued recessionary conditions in the Euro Area. In that regard it is noted that the downside risks still dominate the global economic outlook. Against the backdrop of an uneven pace of global economic growth, the domestic economy is expected to improve moderately through the rest of 2013. Activity in the tourism industry is expected to be lower than in 2012 given the developments for the first half of the year. Construction activity is expected to increase at a moderate pace supported by the on- going work on the new airport terminal building and the construction of a parallel runway and expansion of the runway apron, as well intensive road works programme by the Government. In addition, residential construction activity is also expected to be vibrant as home owners take advantage of the Construct Antigua and Barbuda Initiative (CABI), which is showing positive signs. The fiscal operations of the central government are expected to result in a larger deficit as revenue growth is not expected to exceed the 2012 total and capital expenditure is expected to increase relative to 2012. On the balance of payments, the merchandise trade deficit is expected to widen due to a larger amount of imports as economic activity picks up. Price pressures are expected to remain muted given the outlook for food, commodity and energy prices. Other downside risks to the outlook include the threat of hurricane which could derail the economic recovery.

Output

The tourist industry continued to underperform as tourism output declined in the period of January to June 2013, in contrast to the performance in the first half of 2012. There was a 7.5 per cent reduction in total visitor arrivals as all categories of visitors recorded declines. Stay-over visitor arrivals, the most important category given its economic impact, fell by 5.2 per cent to 129, 391 in contrast to growth of 3.8 per cent in the corresponding period of 2012. All categories of stay-over visitors recorded declines with the exception of visitor arrivals from the Canadian market. The decline in stay- over visitor arrivals was most pronounced in the USA (10.2 per cent), the Caribbean (15.9 per cent) and Italy (29.1 per cent). Weak economic performance in Europe and the Caribbean may explain these declines. By contrast visitor arrivals from Canada rose by 27.9 per cent.

Consistent with the reduced number of ships making calls to Antigua and Barbuda, cruise ship passenger arrivals declined by 8.5 per cent to 355,037 in the first half of 2013.



Output in the construction sector improved during the review period as both public and private residential construction increased. In the public sector, central government capital expenditure totalled $11.8m compared with $7.2m in the corresponding period of 2012, driven by increased activity on an intensive road work programme and continued work on the new airport terminal building. In the private residential sector, the increase in activity was supported by a $9.9m increase in loans and advances for home construction and renovation. In addition, the volume of cement imported, a key indicative indicator of construction activity, rose by 22.3 per cent. While private residential and public sector construction activity improved private non-residential construction remained dormant.

SOURCE: June 2013 Economic and Financial Review released by the Eastern Caribbean Central Bank on October 29

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