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Caribbean Market Overview Q1 2020

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Caribbean Market Overview – Q1 2020

CIBC Capital Markets & CIBC FirstCaribbean International Bank February 2020

Table of Contents

Caribbean Market Review ......................................................................................................... 2

Caribbean Economic Review .................................................................................................. 11

Anguilla .................................................................................................................................... 13

Antigua and Barbuda ............................................................................................................... 15

Aruba ....................................................................................................................................... 17

The Bahamas .......................................................................................................................... 19

Barbados ................................................................................................................................. 21

Belize ....................................................................................................................................... 23

Bermuda .................................................................................................................................. 25

Cayman Islands ....................................................................................................................... 27

Costa Rica ............................................................................................................................... 30

Curaçao ................................................................................................................................... 32

Dominica ................................................................................................................................. 34

Dominican Republic ................................................................................................................ 36

El Salvador .............................................................................................................................. 38

Grenada .................................................................................................................................. 40

Guyana .................................................................................................................................... 42

Jamaica ................................................................................................................................... 44

Panama ................................................................................................................................... 47

St. Kitts and Nevis ................................................................................................................... 49

St. Lucia .................................................................................................................................. 51

Sint Maarten ............................................................................................................................ 53

St. Vincent and the Grenadines .............................................................................................. 55

Suriname ................................................................................................................................. 57

Trinidad and Tobago ............................................................................................................... 59

Turks and Caicos .................................................................................................................... 62

About CIBC ............................................................................................................................. 64

About CIBC FirstCaribbean ..................................................................................................... 66

Notes ....................................................................................................................................... 67

Caribbean Market Overview – Q1 2020 1


Caribbean Market Review



Caribbean Market Review Luis Hurtado CIBC Capital Markets

Summary

Emerging market credits have enjoyed an impressive rally since our last publication. The resolution of the US-China

phase-one negotiation, and the USMCA ratification contributed the most to this stance in late 2019 and in early January.

Moreover, despite a pause in the easing cycle, the accommodative monetary policy in advanced economies is expected

to provide some support for emerging market assets early this year. Nevertheless, a new downside risk for emerging

markets credits appeared during the second half of January as the COVID-19 outbreak in China crowded headlines.

Global growth concerns have increased since then, with commodity producers taking the largest hit as prices declined.

The proactive liquidity injection in the Chinese markets have provided some relief; however, we expect global growth and

trade disruption headlines to provide some volatility in the short term with commodity export countries at the largest risk.

In line with the optimism driven by trade deals, and accommodative monetary policy around the world, Central American

and Caribbean bonds maintained a solid performance in Q4 2019 and early 2020, providing an ideal environment for a

large round of debt issuance in the region. Hence, we saw COSTAR finally issuing US$1.2bln in new COSTAR ‘31s and

tapping COSTAR ‘45s for another US$300mln. PANAMA re-opened two bond issues, PANAMA ‘53s (US$1bln) and

PANAMA ‘30s (US$300mln) for a total US$1.3bln issuance, while DOMREP covered almost entirely its external financial

need for 2020 with US$1bln 20Y and US$1.5bln 40Y bonds. Looking at the intrinsic developments favouring credits in the

region, ELSALV was once again the outperformer as the government passed the 2020 Budget after a tax amnesty was

negotiated with ARENA amid President Bukele’s 90% approval rating, and improvements on security. Nevertheless, a

recent clash with congress reversed this trend. COSTAR also saw some improvement during Q4 2019; however, this

optimism has subsided in recent weeks as the government missed its 2019 fiscal targets by 0.6%-0.7% of GDP.

PANAMA’s lagged behind other credits in the region, as the credit remained expensive, while the long part of the curve

absorbed further debt issuance. DOMREP was once more an underperformer as fiscal slippage continued, in line with the

start of the 2020 presidential election cycle.

In COSTAR, 2019 Nominal deficit landed at 7.0% of GDP, well above the 6.2%-6.4% expected by the government and

our forecast. The improvement in the revenues arising from the implementation of tax measures following the 2018 fiscal

reform have yet to translate into lower fiscal deficits as Costa Rica battles a high interest expense burden (up 23.5%) and

increasing capital expenditures (up 50% y/y) in line with the government’s efforts to boost sluggish growth and reduce the

high unemployment rate. Moreover, despite the implementation of the fiscal rule, we have also seen an acceleration of

current expenditures to 9.4% in 2019, 2.9 p.p. higher than the increase in 2018. The consolidation efforts under the fiscal

reform depend on fiscal rule compliance, with the government estimating savings of 2% of GDP. We maintain our

cautious bias on COSTAR and expect fiscal concerns to remain in place throughout 2020 and accentuate in 2021 as

stricter expenditure rules kick in with central government debt jumping above 60% of GDP.

In Panama, the current administration’s goal to implement a considerable fiscal adjustment process remains a difficult

task for the years to come as growth prospects remain below potential output. Only in 2019, forecasts were revised

steeply downward from 4%-4.5% at the start of the year to end in the 3.1%-3.3% range despite the start of Minera

Panama’s operations in H2 2019. Moreover, the 2020 Budget points to further restrictions on expenditures, with capital

expenses dropping another 6.7%. 2020 growth forecasts by private and public entities range from 3.0%-5.5%, with the

government’s estimates at the high end of the range at 5.2%. The market has remained optimistic on PANAMA with

substantial demand on debt issuance despite fiscal concerns; however, we expect the curve to lose steam as growth fails

to substantially pick up.

The DOMREP curve has already lagged the impressive performance of similar credits in the region, reflecting fiscal

concerns amid the election cycle and the poor performance of the tourism sector. Recent polls point to PRM’s Luis

Abidaner (42%-43%) leading the presidential race with a significant 11 to 15 point advantage over PLD and President

Danilo Medina’s candidate, Gonzalo Castillo (28%-31%), while former president Leonel Fernandez (16%-19%) obtained

a distant third place. As of now, all seems to indicate that the country will head for a runoff election between Abidaner and

Castillo in June 2020, adding to concerns of further fiscal slippage and the underperformance of the DOMREP curve.



Bahamas: Real GDP likely continued to advance during the first nine months of 2019. However, following a

strong performance during the first eight months of 2019, the tourism sector has begun to experience Hurricane

Dorian’s catastrophic impact. Total visitor arrivals to The Bahamas advanced 13.1% y/y during January to August

2019, reflecting expansions in both air (up 13.1% y/y) and sea (up 12.3% y/y) arrivals. Increased air arrivals to

New Providence and Family Islands of 17.0% y/y and 4.7% y/y, respectively, eclipsed an 11.3% y/y decline to

Grand Bahama. Similarly, sea arrivals to New Providence and Family Islands grew 20.2% and 11.4%,

respectively, but arrivals to Grand Bahama fell 13.0% y/y. In the aftermath of Hurricane Dorian, total visitor

arrivals slumped 12.8% y/y in September, reflecting declines of 14.7% y/y and 12.4% y/y in air and sea arrivals

respectively. During FY2018/19 ended June 2019 the fiscal deficit narrowed 46.4% y/y to US$222.4mln, in line

with the government’s target under its Fiscal Responsibility Law (FRL). National debt rose 2.8% y/y to US$8.26bln

(66.9% of 2018 GDP) at September 2019. Central government’s external debt and contingent liabilities fell 1.5%

y/y and 5.3% y/y, respectively, but central government’s domestic debt rose 5.2% y/y.

Barbados: The Central Bank of Barbados (CBB) reports that real GDP fell 0.1% y/y during 2019 as the

improvement in tourism output remained insufficient to compensate for the weak outturn of most other economic

sectors. Tourism GDP expanded 2.9% y/y. Total long-stay arrivals advanced 3.5% y/y, reflecting a greater

number of tourists from Barbados’ two largest source markets, the UK and the US, but arrivals from Canada and

the CARICOM dipped. Despite a 77.8% y/y increase in government capital spending to US$104.9mln,

construction output is estimated to have declined 4.7% y/y, in line with a fall-off in employment in that sector. The

government’s fiscal surplus improved US$120.0mln to US$157.1mln during the first nine months of FY2019/20

ended December 2019. Further, the primary surplus increased US$56.9mln to 4.8% of GDP, with progress

toward the 6% of GDP target for the full fiscal year. The improved fiscal surplus allowed for a reduction in

government debt levels. Total gross public sector debt fell from US$6.43bln (126.3% of GDP) at December 2018

to US$6.22bln (119.5% of GDP) at December 2019, supported by the conclusion of the foreign currency debt

exchange.

Bermuda: The Government of Bermuda reports real GDP expansions of 3.7% y/y and 3.3% y/y in Q1 and Q2

2019, respectively, led by increased gross capital formation. Since then, preliminary indicators suggest a likely

continuation of these trends. Air arrivals from all major markets fell, with the number of tourists from the US, the

UK, Canada, Europe, the Caribbean, Asia and all other markets declining 5.9% y/y, 3.2% y/y, 3.1% y/y, 5.4% y/y,

5.6% y/y, 17.9% y/y and 36.1% y/y, respectively. The government of Bermuda reports that the fiscal deficit

narrowed US$39.2mln to US$7.6mln during the first six months of FY2019/20 ended September 2019. Gross

debt at the end of September 2019 was recorded at US$2.7bln (US$2.56bln net of the sinking fund) and 42.3% of

2018 GDP.

Costa Rica: Q3 2019 GDP growth came in at 2.3% y/y, bouncing back from the 0.6% posted in Q2 but still below

the 2.6% y/y posted in Q2 2018. The latest numbers suggest 2019 GDP will come in at 2.1%, slightly below the

2.2% expected by the Central Bank of Costa Rica. The 2019 nominal deficit came in at 7% of GDP, deteriorating

from the 6.3% of GDP posted in November and the 5.8% deficit posted at the end of 2018. The 12-month primary

deficit also deteriorated to 2.7% of GDP from the 2.2% posted in November and the 2.3% in 2018. We maintain

our 2.0% growth forecast for 2019 and slight rebound to 2.5% in 2020, consistent with the latest economic data

releases and our previous downward bias comments. With regards to the fiscal deficit and financial needs for this

year, with different sectors’ reluctance to fully adhere to the fiscal rule, we see the return of fiscal compliance

concerns into 2020 and above target nominal fiscal deficits.

Dominican Republic: Q3 2019 GDP growth landed at 4.8% y/y, accelerating from the 3.7% y/y posted in Q2

2019 but still below the 5.7% reached in Q1 2019. With this number, Q1-Q3 2019 GDP increased 4.7% y/y, while

preliminary Q4 2019 numbers from Banco Central de la Republica Dominica (BCRD) estimate that 2019 growth

reached 5.1%, the highest in Latin America. January-November 2019 Central Government revenues reached

DOP599bln, increasing 9.1% y/y and well below the 13.1% y/y gain posted during the same period a year earlier.

On the other hand, January-November 2019 total expenses came in at DOP675.9bln or up 12.2% y/y, up from

5.1% y/y posted in the same period a year earlier. With these numbers, the 12-month central government nominal

deficit reached DOP102.5bln or 2.3% of GDP while the primary surplus came in at DOP18.4bln or 0.4% of GDP.



These numbers confirmed our earlier expectations of a nominal fiscal deficit of approximately 2.4% of GDP, well

above the 1.7% budgeted by the government at the start of 2019. On this, we would highlight that in November

the government recognized a fiscal gap of DOP25bln (or 0.6% of GDP), coming from a DOP15bln drop in

revenues and expenditures, amounting to DOP10bln higher than estimated in the approved 2019 budget.

El Salvador: Q3 2019 GDP growth came in at 2.7% y/y, accelerating from the 1.9% y/y posted a quarter earlier

and the 2.3% y/y in Q1 2019. With these numbers 12-month GDP growth came in at 2.3%, right at the Banco

Central of El Salvador’s forecast for 2019. Moreover, economic activity data in H2 2019 shows that this

improvement was led by the construction, electricity, financial, and real estate sectors. More recent data show

that the rebound in growth continued in Q4, with economic activity increasing 2.6% y/y in both October and

November. On the fiscal front, the 12-month NFPS nominal deficit (including donations and pensions) came in at

US$825mln (-3.1% of GDP vs. 2.7% in 2018), while the 12-month primary surplus came in at US$165.8mln (0.6%

of GDP vs 0.9% in 2018). Public sector debt increased 4.4% in 2019 to US$19.8bln. As a percentage of GDP,

public sector debt reached 50.4%, 0.1 percentage points higher than a year earlier.

Jamaica: Greater tourism, mining and construction activity sustained real economic growth in Jamaica at 1.5%

y/y during H1 2019. The government’s fiscal surplus improved US$77.5mln to US$85.6mln over the first eight

months of FY2019/20 ended November 2019 as greater revenue collections outpaced increased spending. Public

sector debt fell 3.8% y/y to US$14.54bln at October 2019. On September 27, 2019, Standard and Poor’s

upgraded Jamaica’s long-term foreign and local currency rating from ‘B’ to ‘B+’, citing the sustained progress in

attaining macroeconomic stability. Additionally, on December 11, 2019, Moody’s upgraded Jamaica’s long-term

issuer and senior unsecured rating from B3 to B2, alluding to the strong commitment to fiscal consolidation and

structural reform.

Panama: Q3 2019 GDP came in at 2.7% y/y, decelerating from the 2.9% y/y and 3.1% y/y increases posted in Q2

and Q1 2019, respectively. With these numbers, the Panamanian economy grew 3.2% over the 12-month period

ending September. We do not expect to see much improvement from this level, despite Minera Panama ramping

up production, as the government implements fiscal measures to control spending and reduce the larger fiscal

deficit. Non-Financial Public Sector (NFPS) revenues in 2019 landed at US$12.3bln, down 3.7%. Total expenses

dropped 1.6% y/y to US$14.4bln. Hence, the NFPS nominal deficit in 2019 came in at 3.1% of GDP, up from

2.9% during the same period in 2018, while the primary deficit reached US$1.4bln or 2.0% of GDP. The new

Fiscal Responsibility Law stipulates a 3.5% nominal deficit for 2019. Nevertheless, despite the deficit beating the

revised 2019 deficit target, Fitch changed Panama’s BBB credit outlook to negative from stable as it reflects a

marked deterioration in fiscal deficits and a significant increase of the government debt burden. This follows the

upward revision to deficit targets by the new administration and growth deceleration.

Suriname: Preliminary data from the Centrale Bank van Suriname suggest investment activity likely improved

during the first nine months of 2019, but led to a deterioration of the external current account balance. The

government’s deficit widened US$46.8mln to US$$223.7mln over H1 2019 as an expansion in revenue receipts

could not keep pace with the surge in government spending. Specifically, government expenditure rose 26.4%

y/y, despite the slashing of arrears payments for previous years to less than one-fifth of that in H1 2018. The

government’s total debt stock rose 14.5% y/y to US$2.77bln. External debt increased 6.8% y/y to US$1.80bln

while domestic debt rose 27.9% y/y to US$969.2mln, respectively, at the end of November 2019.

Trinidad and Tobago: The Central Bank of Trinidad and Tobago (CBTT) estimates that slippage in both energy

and non-energy output likely reduced economic activity during the first two quarters of 2019, while preliminary

indicators suggest a mixed performance over the remainder of the year. The CBTT reports that preliminary

estimates indicate a US$258.4mln improvement in the fiscal deficit to US$581.7mln or 2.4% of GDP for the full

fiscal year ended September 2019, compared to 3.6% of GDP in FY2017/18. Gross public sector debt fell 1.7

percentage points y/y to 74.4% of GDP at September 2019, as central government debt declined 2.0 percentage

points y/y to 55.9% of GDP, but contingent liabilities rose 0.2 percentage points y/y to 18.4% of GDP. Central

government domestic debt fell from 42.1% to 39.8% of GDP, but central government external debt rose from

15.8% to 16.1% of GDP.



Chart 1 High Yield - 10Y Against Benchmark

Chart 2 Investment Grade - 10Y Against Benchmark

Source: Bloomberg and CIBC Capital Markets 10Y bonds are: COSTAR 6 1/8 02/19/31 DOMREP 6 07/19/28 JAMAN 6 3/4 04/28/28 BAHAMA 6.95 11/20/29 BERMUD 4 3/4 02/15/29 TRITOB 4 1/2 08/04/26 PANAMA 3.16 01/23/30 SURINM 9 ¼ 10/26/26 ELSALV 8 5/8 02/28/29

Chart 3 Caribbean Bonds Change in Yields Since Last Publication (Sep 3, 2019)

Source: Bloomberg and CIBC Capital Markets – FICC Strategy.

170

220

270

320

370

420

470

520

570

Feb-18 Jun-18 Oct-18 Feb-19 Jun-19 Oct-19 Feb-20

bps

DOMREP COSTAR JAMAN ELSALV

0

50

100

150

200

250

300

350

400

450


bps

PANAMA BAHAMA BERMUD TRITOB

-150 -100 -50 0 50 100

SURINM 9 1/4 10/26/26DOMREP 7 1/2 05/06/21

DOMREP 6.4 06/05/49TRITOB 9 3/4 07/01/20

DOMREP 6.85 01/27/45DOMREP 7.45 04/30/44PANAMA 3.16 01/23/30PANAMA 3.87 07/23/60PANAMA 4.3 04/29/53

PANAMA 3 7/8 03/17/28PANAMA 4 1/2 05/15/47PANAMA 9 3/8 04/01/29PANAMA 3 3/4 03/16/25

PANAMA 4 09/22/24BERMUD 4.854 02/06/24BAHAMA 7 1/8 04/02/38PANAMA 8 7/8 09/30/27PANAMA 7 1/8 01/29/26DOMREP 6 7/8 01/29/26

ARUBA 4 5/8 09/14/23JAMAN 9 1/4 10/17/25

DOMREP 5 7/8 04/18/24COSTAR 5 5/8 04/30/43

COSTAR 7 04/04/44DOMREP 5 1/2 01/27/25DOMREP 8 5/8 04/20/27BAHAMA 6.95 11/20/29

COSTAR 7.158 03/12/45JAMAN 6 3/4 04/28/28DOMREP 6.6 01/28/24

BAHAMA 6 5/8 05/15/33JAMAN 7 5/8 07/09/25JAMAN 7 7/8 07/28/45JAMAN 8 1/2 02/28/36

BAHAMA 5 3/4 01/16/24ELSALV 7.1246 01/20/50COSTAR 4 1/4 01/26/23COSTAR 4 3/8 04/30/25

JAMAN 8 03/15/39ELSALV 7 5/8 09/21/34ELSALV 7 5/8 02/01/41TRITOB 4 3/8 01/16/24ELSALV 7 3/4 01/24/23ELSALV 7.65 06/15/35TRITOB 4 1/2 08/04/26ELSALV 8 5/8 02/28/29ELSALV 6 3/8 01/18/27ELSALV 5 7/8 01/30/25



Chart 4 Caribbean – Investment Grade

Chart 5 Caribbean – High Yield

Source: Bloomberg and CIBC Capital Markets Source: Bloomberg and CIBC Capital Markets

Chart 6 Central America – Panama, Costa Rica, and El Salvador

Chart 7 ELSALV ‘23s vs. COSTAR ‘23s


Chart 8 COSTAR ‘44s vs. DOMREP ‘44s

Chart 9 PANAMA ‘24s vs. BAHAMA ‘24s and BERMUD ‘24s


ARUBA '23

BAHAMA '24

BAHAMA '29

BAHAMA' 33

BAHAMA '38

BERMUD '23 BERMUD '24

BERMUD '27

TRITOB '27

TRITOB '24

2

3

4

5

6

2 4 6 8 10 12

YTM

Modified Duration

BARBAD '29

DOMREP '21

DOMREP 4/18/24

DOMREP 1/28/24

DOMREP '25

DOMREP '26

DOMREP 1/25/27

DOMREP 4/20/27

DOMREP '28

DOMREP '30

DOMREP '44 DOMREP '45

DOMREP '48 DOMREP '49

DOMREP '60

JAMAN 7/9/25

JAMAN 10/17/25

JAMAN '36

JAMAN '39 JAMAN '45

SURINM '26

2

4

6

8

10

12

14

0 2 4 6 8 10 12 14 16 18

YTM

Modified Duration

COSTAR '20

COSTAR '23

COSTAR '25 COSTAR '31

COSTAR '43

COSTAR '44 COSTAR '45

PANAMA '24 PANAMA '25

PANAMA '26

PANAMA '27

PANAMA '28

PANAMA '29 PANAMA '30 PANAMA '47

PANAMA '53

PANAMA '60 ELSALV '23

ELSALV '25

ELSALV '27

ELSALV '29

ELSALV '34

ELSALV '35 ELSALV '41

ELSALV '50

0

1

2

3

4

5

6

7

0 5 10 15 20 25

YTM

Modified Duration -5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

-150

-100

-50

0

50

100

150

200

250

300

350


Spread

Z-Score (RHS)

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

-40

10

60

110

160

210


Spread

Z-Score (RHS)

-280

-230

-180

-130

-80

-30

20


PANAMA '24s - BAHAMA '24s

PANAMA '24s - BERMUD '24s



Table 1 Public Sector Fiscal Accounts and Debt 2020 or 2020/21

2020 or 2020/21 Primary/Adjusted

Balance Nominal Balance

Gross Government Debt

Net Public Sector Debt

Real GDP Growth

% of GDP % of GDP % of GDP % of GDP % of GDP

Antigua and Barbuda -0.8% -4.3% 90.1% n.a. 3.3%

Aruba 4.0% -0.8% 75.5% 49.4% 1.0%

The Bahamas -2.9% -5.9% 66.1% 62.4% -0.6%

Barbados 6.0% 2.9% 110.4% 105.6% 0.6%

Belize 1.9% -1.1% 90.4% 86.1% 2.1%

Bermuda 2.2% 0.4% 39.6% 0.5% 0.8%

Cayman Islands 1.9% 1.4% 7.6% n.a. 2.5%

Costa Rica -1.5% -6.0% 61% n.a. 2.5%

Dominica -3.2% -5.0% 82.0% n.a. 4.9%

Dominican Republic 0.2% -2.7% 40.0% n.a 5.5%

El Salvador 0.6% -3.0% 70.0% n.a. 2.3%

Grenada 6.2% 4.3% 54.5% n.a. 2.7%

Jamaica 6.7% 0.5% 91.0% 84.9% 1.0%

Panama -1.0% -2.75% 47.0% n.a. 4.2%

St. Kitts and Nevis -2.8% -4.3% 58.1% n.a. 3.5%

St. Lucia 0.7% -2.7% 69.6% n.a. 3.2%

St. Vincent and the Grenadines 0.4% -1.5% 70.6% 67.8% 2.3%

Suriname -2.7% -5.0% 68.5% 66.1% 1.4%

Trinidad and Tobago -2.4% -5.6% 64.2% n.a. 1.5%

Sources: IMF, Bloomberg, CIBC Capital Markets, Standard and Poor's, Moody’s. NA: Not available.

Table 2 Ratings of Caribbean Sovereigns

2019 Ratings

Ratings Key

Investment Grade High Yield

S&P Moody’s S&P Moody’s S&P Moody’s

Aruba BBB+ NA AAA Aaa BB+ Ba1

The Bahamas BB+ Baa3 AA+ Aa1 BB Ba2

Barbados B- Caa3 AA Aa2 BB- Ba3

Bermuda A+ A2 AA- Aa3 B+ B1

Cayman NA Aa3 A+ A1 B B2

Costa Rica B+ B2 A A2 B- B3

Dominican Republic BB- Ba3 A- A3 CCC+ Caa1

El Salvador B- B3 BBB+ Baa1 CCC Caa2

Jamaica B+ B2 BBB Baa2 CCC- Caa3

Panama BBB+ Baa1 BBB- Baa3 CC Ca

Suriname B B2 C C

Trinidad and Tobago BBB Ba1

*-: On review for downgrade

Sources: Bloomberg, S&P, and Moody’s



Table 3 Caribbean Bonds and Indicative Prices/Spreads (As of February 14, 2020)

Aruba

Bond Price Yield 3m Yield Change Z-Spread S&P Moody's Fitch

ARUBA 4 5/8 09/14/23 104.79 3.19% -16.45 110.72 BBB+ NR BBB-

Bahamas


BAHAMA 5 3/4 01/16/24 109.18 3.23% -52.19 172.19 BB+ Baa3 NR

BAHAMA 6.95 11/20/29 118.60 4.56% -29.96 300.87 BB+ Baa3 NR

BAHAMA 6 5/8 05/15/33 115.64 4.99% -31.61 336.86 BB+ Baa3 NR

BAHAMA 7 1/8 04/02/38 119.82 5.40% -8.97 372.86 BB+ Baa3 NR

Barbados


BARBAD 6 1/2 10/01/29 105.01 5.81% NA 406.99 B- NA NR

Bermuda


BERMUD 4.138 01/03/23 105.65 2.10% -8.57 61.77 A+ A2 WD

BERMUD 4.854 02/06/24 110.37 2.11% -10.41 64.70 A+ A2 WD

BERMUD 3.717 01/25/27 107.17 2.58% 2.21 105.39 A+ A2 NA

BERMUD 3.717 01/25/29 115.68 2.77% -0.78 118.98 A+ A2 NA

Costa Rica


COSTAR 4 1/4 01/26/23 100.49 4.07% -55.83 261.02 B+ B2 B+

COSTAR 4 3/8 04/30/25 99.95 4.39% -59.55 292.69 B+ B2 B+

COSTAR 6 1/8 02/19/31 104.86 5.53% NA 393.36 B+ B2 B+

COSTAR 5 5/8 04/30/43 91.85 6.30% -20.01 459.30 B+ B2 B+

COSTAR 7 04/04/44 104.83 6.60% -22.38 490.36 B+ B2 B+

COSTAR 7.158 03/12/45 106.46 6.63% -27.64 493.98 B+ B2 B+

Dominican Republic


DOMREP 7 1/2 05/06/21 103.56 4.44% 30.04 74.84 BB- Ba3 BB-

DOMREP 5 7/8 04/18/24 107.97 3.79% -22.68 175.50 BB- Ba3 BB-

DOMREP 6.6 01/28/24 111.84 3.37% -29.86 192.77 BB- Ba3 BB-

DOMREP 5 1/2 01/27/25 108.12 3.69% -22.57 225.56 BB- Ba3 BB-

DOMREP 6 7/8 01/29/26 115.27 3.97% -16.61 249.57 BB- Ba3 BB-

DOMREP 5.95 01/25/27 110.93 4.12% -8.72 263.74 BB- Ba3 BB-

DOMREP 8 5/8 04/20/27 122.48 4.87% -27.79 293.08 BB- Ba3 BB-

DOMREP 6 07/19/28 111.95 4.29% -6.58 278.18 BB- Ba3 BB-

DOMREP 4 1/2 01/30/30 101.72 4.29% NA 273.58 BB- Ba3 BB-

DOMREP 7.45 04/30/44 121.30 5.80% 12.31 411.35 BB- Ba3 BB-

DOMREP 6.85 01/27/45 114.30 5.76% 14.69 407.28 BB- Ba3 BB-

DOMREP 6 1/2 02/15/48 110.40 5.75% 16.31 405.75 BB- Ba3 BB-

DOMREP 6.4 06/05/49 109.21 5.75% 19.38 405.46 BB- Ba3 BB-

DOMREP 5 7/8 01/30/60 102.43 5.72% NA 403.70 BB- Ba3 BB-

El Salvador


ELSALV 7 3/4 01/24/23 110.65 3.87% -95.02 240.75 B- B3 B-u

ELSALV 5 7/8 01/30/25 107.80 4.12% -122.68 266.79 B- B3 B-u

ELSALV 6 3/8 01/18/27 110.08 4.65% -115.79 317.85 B- B3 B-u

ELSALV 8 5/8 02/28/29 123.38 5.33% -98.89 380.14 B- B3 B-

ELSALV 8 1/4 04/10/32 123.32 5.58% -98.94 397.55 B- B3 B-u

ELSALV 7 5/8 09/21/34 114.27 6.13% -77.04 448.89 B- B3 B-u

ELSALV 7.65 06/15/35 117.14 5.93% -90.78 429.33 B- B3 B-u

ELSALV 7 5/8 02/01/41 117.03 6.17% -76.84 448.59 B- B3 B-u

ELSALV 7.1246 01/20/50 110.27 6.35% -55.80 465.82 B- B3 B-



Jamaica


JAMAN 7 5/8 07/09/25 118.79 3.74% -37.95 151.91 B+ B2 B+u

JAMAN 9 1/4 10/17/25 128.28 3.67% -20.38 221.61 B+ B2 B+u

JAMAN 6 3/4 04/28/28 118.91 4.02% -27.78 223.25 B+ B2 B+u

JAMAN 8 1/2 02/28/36 138.17 5.01% -55.12 337.11 B+ B2 B+u

JAMAN 8 03/15/39 139.02 4.84% -63.68 310.16 B+ B2 B+u

JAMAN 7 7/8 07/28/45 138.07 5.17% -44.09 348.46 B+ B2 B+u

Panama


PANAMA 4 09/22/24 108.07 2.14% -9.04 60.97 BBB+ Baa1 BBB

PANAMA 3 3/4 03/16/25 107.28 2.23% -5.55 71.44 BBB+ Baa1 BBB



PANAMA 3 7/8 03/17/28 110.33 2.46% 7.35 92.71 BBB+ Baa1 BBB


PANAMA 3.16 01/23/30 105.53 2.53% 9.14 97.37 BBB+ Baa1 BBB






Suriname


SURINM 9 1/4 10/26/26 84.97 12.64% 130.27 1085.94 B B2 NR

Trinidad and Tobago


TRITOB 9 3/4 07/01/20 102.83 1.94% 16.30 1.68 BBB Ba1 NR

TRITOB 4 3/8 01/16/24 106.88 2.52% -83.00 104.61 BBB Ba1 NR

TRITOB 4 1/2 08/04/26 108.63 3.02% -93.91 154.44 BBB Ba1 NR

Source: Bloomberg and CIBC Capital Markets



Caribbean Economic Review

Caribbean Market Overview – Q1 2020 11 2-


Caribbean Economic Review Tiffany Grosvenor-Drakes CIBC FirstCaribbean

Increased tariffs, weakened global trade, and geopolitical tensions characterised the global economic environment in 2019. Against this backdrop, major central banks adopted more accommodative monetary policy aimed at supporting aggregate demand. In its January 2020 World Economic Outlook, the IMF estimates that global growth decelerated from 3.6% in 2018 to 2.9% in 2019, the slowest pace since 2009, reflecting a weaker performance of both advanced economies (from 2.2% in 2018 to 1.7% in 2019) and emerging markets and developing economies (from 4.5% in 2018 to 3.7% in 2019). Among the region’s major trading partners, real GDP growth is estimated to have moderated in the US and Canada from 2.9% and 1.9% to 1.3% and 1.5%, respectively, while growth likely remained relatively stable in the UK at 1.4%. Meanwhile, oil prices averaged 10.9% lower in 2019 relative to 2018 as greater production in the US restricted the effects of production cuts by OPEC and geopolitical tensions in the Middle East. Further, even though oil prices spiked following the US military operation in Iraq in January 2020, the increase appeared to have been short-lived amid abundant supply, with the price of WTI crude oil falling 15.6% since December 2019 to US$52 per barrel by the end of January. The slowdown of the region’s major trading partners, alongside persistent drought conditions and domestic operational difficulties, led to slower growth in about half of the region’s markets thus far in 2019. In contrast, data available to date suggest that activities related to the emerging energy sector strengthened Guyana’s economic performance, while delayed recovery from the 2017 hurricanes resulted in a stronger performance and a rebound in economic activity in Dominica and Sint Maarten, respectively. Regional tourism activity continued apace as total stay-over arrivals rose 15.8% y/y during January to September 2019, reflecting growth across all markets except Bermuda. Further, cruise passenger arrivals also expanded, but fell in those markets that received a temporary boost in 2018 due to diversions from hurricane-hit markets. Although The Bahamas recorded a robust tourism performance over the first nine months of the year, visitor arrivals in September specifically fell 12.8% y/y in the aftermath of Hurricane Dorian. Meanwhile, economic output contracted in Curacao and Trinidad and Tobago during H1 2019. Despite recent tourism gains, Curaçao’s economy remained in a prolonged recession largely due to reduced refinery activity, while the continued decline of the oil sector, disruptions to natural gas production and sluggish non-energy output reduced economic activity in Trinidad and Tobago. Lower global energy prices and slower domestic demand constrained regional consumer price inflation during the 12 months ended September 2019. Regional consumer prices rose 1.5% y/y, a modest deceleration from 2.1% y/y one year earlier and reflecting higher prices in all markets except Belize, St. Kitts and Nevis and St. Lucia, where declines in the price of housing, utilities, gas and other fuels outweighed increases in other price categories. Further, prices accelerated y/y in Barbados only, largely attributed to the effect of drought conditions and seafood scarcity on food prices, as well as higher transportation costs. Meanwhile, reduced energy import bills coupled with greater tourism receipts led to FX reserve accumulation in most markets. Reinsurance receipts also boosted reserves in the Bahamas, while reserves in Barbados benefitted from greater funding from international financial institutions. Conversely, large external current account deficits in Belize continued to limit FX reserves’ growth recorded at just below three months of imports of goods and services, while the downward trajectory in Trinidad and Tobago persisted to date.

Chart 1 Trends in Regional1 Tourist Arrivals

Chart 2 Regional2 Loan Growth (y/y; %)

Source: Caribbean Tourism Organization, Eastern Caribbean Central Bank and CIBC FirstCaribbean. Source: Regional authorities and CIBC FirstCaribbean.

1 Caribbean region includes: Anguilla, Antigua and Barbuda, Aruba, the Bahamas, Barbados, Belize, British Virgin Islands, Cayman Islands, Curaçao, Dominica, Grenada, Jamaica, St. Kitts and Nevis, St. Lucia, St. Maarten and St. Vincent and the Grenadines. 2 Caribbean region includes: Anguilla, Antigua and Barbuda, Aruba, the Bahamas, Barbados, Belize, Curaçao, Dominica, Grenada, Jamaica, St. Kitts and Nevis, St. Lucia, St. Maarten, St. Vincent and the Grenadines, Trinidad and Tobago, and Turks and Caicos Islands.

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11

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15

Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19

(mln) 12-mth moving average growth (%)

Total Stay-Over Arrivals (R)

Growth in Tourist Arrivals (L)

-10

-5

0

5

10

15

20


Retail Loans

Corporate Loans



Regional governments recorded mixed fiscal performances, as eight of 20 markets registered weaker fiscal balances, two of which still recorded surpluses. Specifically, a fall-off in Citizenship by Investment (CBI) inflows contributed to the fiscal deterioration in Dominica and St. Lucia, while revenue collected in Antigua and Barbuda dipped even with greater CBI receipts. Meanwhile, capital expansion worsened the fiscal accounts in St. Vincent and the Grenadines, while the fiscal deficits of Belize and Suriname deteriorated during the period despite fiscal consolidation efforts. In contrast, the Bahamian Government slashed its deficit by one-third during Q1 of FY 2019/20 ended September 2019. However, the Government reported that the expected revenue loss coupled with the necessary capital outlays and spending on social services following Hurricane Dorian will likely produce a fiscal deficit of 5.3% of GDP for FY2019/20, about five times the Pre-Dorian target of 1% under its Fiscal Responsibility Law (FRL). Overall, debt rose in approximately half the markets, as only nine of the 20 countries – Anguilla, Barbados, Cayman Islands, Curacao, Grenada, Guyana, Jamaica, St. Kitts and Nevis and Turks and Caicos Islands – registered fiscal surpluses during the period. Loan balances continued to advance, with 13 of 20 markets experiencing growth between September 2018 and September 2019. Total loans and advances rose 4.2% y/y at September 2019, led by greater than 8% growth in Antigua and Barbuda, Aruba, Jamaica and Trinidad and Tobago. Retail loans rose 4.9% y/y, largely reflecting greater mortgage lending, while corporate loans increased 3.4% y/y. Further, loan delinquency improved in all markets except Anguilla and St. Kitts and Nevis, where the non-performing loan ratios remained elevated at 23.3% and 24.7%, respectively. Lower-than-expected domestic demand in a few emerging markets, India in particular, has prompted the IMF to revise downward its global growth forecast for 2020 by 0.2 percentage points. Notwithstanding, the IMF suggests that the global environment may be approaching its turning point, as the factors that slowed manufacturing activity and global trade are appearing to wane in the face of recent improvement in US-China trade relations and retreated fears of a hard Brexit. On the back of a supportive financial environment, the IMF projects that global growth will rise to 3.3% in 2020. These developments suggest that Caribbean economies will likely continue to advance in 2020. Real GDP growth in Guyana, in particular, is expected to surge given the commencement of oil production in December 2019. However, economic output could likely experience a small contraction in The Bahamas pending the boost from the rebuilding on Grand Bahama and Abaco Islands, while an agreement with the Klesch Group to operate the Isla refinery should improve economic prospects for Curaçao. Finally, while some risks to global growth have subsided, the recent outbreak of the coronavirus has the potential to disrupt economic activity in China. And, depending on its severity and reach, it could disrupt global travel and stymie global economic growth.

Chart 3 Regional3 Inflation and Intl. Commodity Prices (y/y; %)

Source: Regional authorities, International Monetary Fund and CIBC FirstCaribbean. * Average of U.K. Brent, Dubai and West Texas Intermediate + International Monetary Fund Food Index.

3 Caribbean region includes Anguilla, Antigua and Barbuda, Aruba, Barbados, Belize, British Virgin Islands, Cayman Islands, Curaçao, Dominica, Grenada, Jamaica, St. Kitts and Nevis, St. Lucia, St. Maarten, St. Vincent and the Grenadines and Trinidad and Tobago.

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-30

-10

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30

50

70

90

110

-1

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2

3

4

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Regional Inflation Rate (L)Growth in International Oil Prices* (R)Growth in International Food Prices+ (R)



Anguilla Tiffany Grosvenor-Drakes CIBC FirstCaribbean

Production, Prices, and Employment Indicators of tourism activity suggest that the economic recovery was likely sustained during H1 2019; however, the construction and investment boost following Hurricane Irma’s destruction is beginning to fade.

Tourism activity continued to rebound, with the total number of visitor arrivals and visitor expenditure advancing

157.1% y/y and 86.5% y/y, respectively, during H1 2019. The number of stay-over tourists from the US, the

largest source market, rose 185.9% y/y, while the number of visitors from Canada, the UK, the Caribbean and all

other markets also grew, up 150.4% y/y, 145.1% y/y, 14.8% y/y, and 156.1% y/y, respectively. The number of

excursionists also rebounded 180.2% y/y, likely connected to the resumption of cruise ship calls to Sint Maarten,

the main gateway for Anguilla.

Preliminary indicators suggest a likely weakening of investment activity as imports of inedible crude materials

except fuels fell 3.8% y/y and imports of machinery and transport equipment declined 7.4% y/y following

expansions of 51.8% y/y and 54.4% y/y, respectively. Further, capital outlays by the Government shrunk by more

than half during the six-month period. However, the merchandise trade deficit improved US$168.1mln to a

US$91.4mln surplus, reflecting the combined effect of a 7.9% y/y decline in total imports and a 79.3% y/y

expansion in total exports.

Meanwhile, a 9.1% y/y reduction in commercial bank loan balances over H1 2019, attributed to most public sector

projects being funded by the UK Government and the risk-averse position of commercial banks, suggests a

contraction in the financial intermediation sector.

Consumer prices rose 1.9% y/y during September 2019, reflecting higher prices for food and non-alcoholic beverages (up 2.7% y/y), housing, utilities, gas and fuels (up 0.2% y/y), communication (up 3.0% y/y) and transport (up 5.8% y/y).

Developments in Financial Markets Declining loan balances increased excess liquidity over the four quarters ended September 2019. Loan quality and capital adequacy worsened during the same period.

Lending to businesses and the public sector fell 16.4% y/y and 74.4% y/y, respectively, lowering corporate loans

20.6% y/y. Retail loan balances also declined (down 7.3% y/y), reducing total loans and advances 13.2% y/y.

Total deposits slipped 0.9% y/y, reflecting a 22.1% y/y fall-off in non-resident deposits and 2.7% y/y decline in

corporate deposits, which overshadowed a 1.1% y/y increase in retail deposits.

Consequently, the loan-to-deposit ratio declined 6.5 percentage points y/y to 45.6% at the end of September

2019. The weighted average lending rate fell 5bps y/y to 9.81%, but the weighted average deposit rate rose 21bps

y/y to 2.44%, reducing the spread 26 bps y/y to 7.37% at the end of the same period.

Chart 1 Stay-Over Tourist Arrivals (y/y; %)

Chart 2 Inflation (y/y; %)

Source: Caribbean Tourism Organization, Eastern Caribbean Central Bank and CIBC FirstCaribbean. Source: Eastern Caribbean Central Bank and CIBC FirstCaribbean.

35

45

55

65

75

85

95

105

1,900

1,950

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2,050

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2,200

2,250


(000's) (US$/person)

Visitor Expenditure/person - 12-month average (L)

Stay-Over Arrivals (R)

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0

1

2

3

4

5

2014Q3 2015Q3 2016Q3 2017Q3 2018Q3 2019Q3

All Items

Food

Fuel and Light



The non-performing loan ratio worsened from 21.0% in September 2018 to 23.3% in September 2019, while regulatory capital to risk-weighted assets fell 2.5 percentage points y/y to 16.6%. However, the annualised return on average assets improved to 0.96% at September 2019 from -0.21% one year earlier.

Government Debt

Greater revenue collections, particularly on domestic goods and services, improved the government’s fiscal surplus by

US$8.1mln y/y to US$9.1mln during the first six months of 2019.

Increased taxes on income and profits (up US$0.6mln or 22.1% y/y), property (up US$1.5mln or 260.8% y/y),

domestic goods and services (up US$6.8mln or 72.5% y/y), and international trade and transactions (up

US$1.8mln or 10.4% y/y) raised total tax revenue by 36.1% y/y. Specifically, the robust expansion in visitor

arrivals over H1 2019 underpinned greater accommodation tax receipts and led to increased collections from

goods and services. However, a US$0.4mln (5.5% y/y) fall-off in non-tax revenue moderated the expansion in

current revenue to US$10.3mln (28.1% y/y), while no grant inflows were recorded compared to US$1.5mln one

year earlier.

Total current spending advanced US$1.4mln (4.0% y/y). Expenditure on goods and services, interest payments,

and transfers and subsidies rose US$1.5mln (18.7% y/y), US$0.2mln (7.0% y/y) and US$0.4mln (4.6% y/y),

respectively, but outlays on personal emoluments fell US$0.7mln (4.4% y/y). When combined with a US$0.7mln

(56.7% y/y) fall-off in capital spending and net lending, total expenditure rose 2.1% y/y to US$37.8mln.

The stock of public debt fell 1.6% y/y to US$183.9mln (57% of GDP) at the end of June 2019.

Outlook

Following 10.9% growth in 2018, the Eastern Caribbean Central Bank (ECCB) projects an 8.8% real GDP expansion in

2019. Despite the slowing momentum of global economic growth and the completion of most of the reconstruction work to

hotels and restaurants, the ECCB expects that strong growth in tourism output, along with greater public sector

investment, will sustain the expansion. Further, the increase in tourism activity is likely to support greater output in

wholesale and retail trade, transport storage and communication, and electricity gas and water production.

Chart 3 Public Sector Debt Outstanding

Chart 4 Growth in Key Balances (y/y; %)

Source: Eastern Caribbean Central Bank and CIBC FirstCaribbean. Source: Eastern Caribbean Central Bank and CIBC FirstCaribbean.

0

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2015Q2 2016Q2 2017Q2 2018Q2 2019Q2

(US$mln)

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Antigua and Barbuda Tiffany Grosvenor-Drakes CIBC FirstCaribbean

Production, Prices, and Employment

Robust tourism activity likely pillared improved economic activity in Antigua and Barbuda during H1 2019, but preliminary

data from the Eastern Caribbean Central Bank (ECCB) suggest a slower pace relative to the similar period in 2018.

Stay-over tourism activity continued to expand, with arrivals from the US, the UK, the Caribbean and all other

markets increasing 17.7% y/y, 6.7% y/y, 9.5% y/y and 24.5% y/y, respectively. However, Canadian arrivals dipped

3.1% y/y during H1 2019. While total stay-over arrivals advanced 11.4% y/y, the number of cruise-ship passenger

arrivals contracted 8.8% y/y, reflecting the return to normal levels following an expansion associated with port

disruptions in hurricane-affected markets, while yacht arrivals dipped 0.1% y/y. Notwithstanding, total visitor

spending increased 12.9% y/y during the period.

Preliminary indicators of construction and investment activity suggest a likely moderation. Imports of machinery

and transport equipment rose 14.5% y/y, but imports of inedible crude materials except fuels declined 18.7% y/y.

Further, the volume of cement imports advanced 14.3% y/y, slower than the 44.4% y/y expansion recorded one

year earlier, while government spending on capital works slipped US$1.7mln (12.1% y/y) during H1 2019.

Total imports increased US$32.5mln and overshadowed a US$16.9mln expansion in total exports to widen the overall

merchandise trade deficit 1.8% y/y to US$878.8mln.

Higher prices for food and non-alcoholic beverages (up 1.2% y/y) and transport (up 0.6% y/y) lifted consumer prices 0.6% y/y at September 2019.

Developments in Financial Markets Strong loan growth led to reduced excess liquidity over the four quarters to September 2019. Banks’ loan quality, profitability and capital adequacy improved during the period.

Increased lending to businesses (up 36.8% y/y) eclipsed a 5.9% y/y fall-off in public sector lending, lifting

corporate loans 17.8% higher y/y. When combined with a 1.6% y/y expansion in retail loans, total loans advanced

9.8% y/y.

Total deposit balances slipped 1.7% y/y as a 4.8% y/y decline in retail deposits overshadowed 0.9% y/y and

15.1% y/y expansions in corporate and non-resident funding, respectively.

As a result, the loan-to-deposit ratio increased 7.4 percentage points y/y to 70.4% at September 2019, while the

weighted average lending and deposit rates rose 5bps y/y and 12bps y/y to 8.58% and 1.57%, respectively, at the

end of the same period.

Chart 1 Stay-Over Tourist Arrivals


Source: Eastern Caribbean Central Bank and CIBC FirstCaribbean, Caribbean Tourism Organization. Source: Eastern Caribbean Central Bank and CIBC FirstCaribbean.

220

230

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250

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Visitor Expenditure/person (L)


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2014Q3 2015Q3 2016Q3 2017Q3 2018Q3 2019Q3

All Items (L)

Food (L)



Banks’ financial stability indicators continued to improve over the period. Non-performing loans to gross loans fell

from 7.0% in September 2018 to 5.3% in September 2019, while capital adequacy increased 0.6 percentage

points y/y to 36.5%. However, the annualized return on assets slipped marginally over the same period.

Government Debt

The Government’s fiscal deficit widened US$5.1mln to US$23.0mln during H1 2019, reflecting an expansion in current

spending amid sluggish revenue growth.

An US$8.0mln expansion in Citizenship by Investment (CBI) receipts contributed to a US$2.3mln (11.9% y/y)

increase in non-tax revenue. However, tax collections fell US$2.2mln (1.6% y/y) – attributed to tax waivers

granted – and led to a marginal (0.1% y/y) rise in current revenue to US$152.7mln. Taxes on income and profits

and property taxes advanced US$0.1mln (0.7% y/y) and US$2.9mln (52.6% y/y), respectively, but taxes on

domestic goods and services and taxes on international trade and transactions declined US$4.7mln (7.4% y/y)

and US$0.4mln (0.9% y/y), respectively. Capital revenue increased US$0.4mln (74.6% y/y) during the six-month

period.

Capital spending fell US$1.7mln (12.1% y/y), but current expenditure rose US$7.3mln (4.6% y/y). While interest

payments declined US$1.5mln (7.7% y/y), attributed to a likely increase in account payables, expenditure on

personal emoluments, goods and services, transfers and subsidies rose US$4.3mln (6.4% y/y), US$2.9mln

(10.7% y/y) and US$1.6mln (3.8% y/y), respectively.

Total public debt increased 3.9% y/y to US$1.27bln and 3.0 percentage points y/y to 79.2% of 2018 GDP at the end of

June 2019.

Outlook

The ECCB expects real GDP growth to moderate to 4.4% in 2019. Increased activity in the tourism and construction

sectors is projected to bolster economic output, with the cruise tourism sector in particular poised to benefit from the

management of port operations and investment by Global Ports. Further, the opening of the UWI Five Islands Campus is

expected to boost demand for education, housing, transport, and consumer goods during the second half of 2019.

However, increased outlays to fund the campus operations, as well as a lower revenue intake attributed to tax waivers,

are likely to worsen the government’s fiscal deficit during the year.




1,000

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(US$mln)

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Loans

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Aruba Tiffany Grosvenor-Drakes CIBC FirstCaribbean


The Centrale Bank van Aruba reports that economic activity likely expanded marginally during January to June 2019.

Total stay-over arrivals and visitor nights advanced 6.5% y/y and 4.7% y/y, respectively, during the first six months

of 2019. Arrivals from North America increased 12.1% y/y, largely reflecting a 13.1% rise from the US, while

12.8% more tourists from the Netherlands contributed to an 11.0% y/y expansion in European visitors. However,

arrivals from Latin America declined 21.6% y/y, as the Venezuelan market continued to slide (down 63.7% y/y),

while arrivals from all other markets fell 22.9% y/y. Since then, stay-over arrivals grew 4.9% y/y, but an 8.8% y/y

decline in the number of ship calls reduced total cruise ship passenger arrivals by 2.2% y/y during January to

September 2019.

The number and value of construction permits rose 44.8% y/y and 15.4% y/y, respectively, while the number of

connections for electricity and water grew 2.1% y/y and 1.3% y/y, respectively, indicating likely improved

construction activity during H1 2019. Meanwhile, greater quantities of electricity (up 1.4% y/y) and water

production (up 3.4% y/y) more than offset a 3.0% decline in gas production and likely resulted in an uptick in

utilities output.

Consumer prices grew 4.4% y/y during September 2019, compared to an increase of 4.7% y/y one year earlier.

Developments in Financial Markets Loan growth continued apace over the 12 months ended August 2019. When coupled with more modest deposit growth, excess liquidity fell, while loan quality and capital adequacy continued to improve during the period.

Loan growth accelerated to 8.2% y/y, reflecting higher lending balances to both residents (8.1% y/y) and non-

residents (13.1% y/y). A 17.2% y/y expansion in business loans pushed corporate balances 16.7% higher y/y,

while an 8.2% y/y climb in personal mortgages overshadowed a 5.1% y/y fall-off in consumer loans and lifted retail

loans 5.2% higher at August 2019, compared to one year earlier.

Increased time (up 11.8% y/y) and savings deposits (up 3.1% y/y) more than compensated for a 2.2% y/y

contraction in demand deposits and led to a 1.9% y/y build-up in total funding balances.

Consequently, the loan-to-deposit ratio rose 4.5 percentage points to 77.0% at August 2019. The weighted

average rate on loans fell 10bps y/y to 6.8%, but the weighted average rate on deposits increased 90bps y/y to

2.5% at Q2 2019.

Chart 1 Real GDP and Unemployment (%)

Chart 2 Growth in Tourist Arrivals and Length of Stay

Source: Centrale Bank van Aruba and CIBC FirstCaribbean. Source: Caribbean Tourism Organization, Centrale Bank van Aruba and CIBC FirstCaribbean.

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Banks’ non-performing loan ratio fell 1.1 percentage points y/y to 2.8% at September 2019, while the capital

adequacy ratio rose marginally y/y to 33.3% at the end of the same period.

The central bank’s net foreign assets increased 8.0% y/y to US$1.0bln or approximately 22.2 weeks of 2019 projected

imports of goods and services during October 2019.

Government Debt A US$38.6mln surge in turnover tax receipts boosted government revenue, but greater spending, particularly on goods and services, reversed some of the gains, reducing the Government’s deficit by US$10.6mln during the first nine months of 2019.

Increased turnover tax collections due to the July 1, 2018 rate hike (up 73.4% y/y) was largely responsible for a

US$46.6mln expansion in tax revenue. When combined with a US$7.3mln (10.3% y/y) rise in non-tax receipts,

total revenue advanced to US$585.1mln (up 10.1% y/y). Taxes on commodities, property, services and foreign

exchange rose, increasing US$6.7mln (5.1% y/y), US$6.5mln (17.4% y/y), US$1.3mln (6.3% y/y), and US$2.1mln

(10.3% y/y), respectively, but taxes on income and profits fell US$8.5mln (4.3% y/y).

Government spending rose US$45.0mln (8.2% y/y), largely reflecting a US$35.3mln (41.1% y/y) increase in

goods and services’ outlays. Expenditure on wages, employers’ contributions, wage subsidies, investment and

transfer and subsidies also rose, growing US$7.2mln (4.5% y/y), US$1.7mln (4.0% y/y), US$1.6mln (3.0% y/y),

US$10.4mln (283.3% y/y), and US$0.2mln (0.2% y/y), respectively. However, there were no transfers to General

Health Insurance compared to US$11.5mln one year earlier.

Total debt declined 1.9% y/y to US$2.41bln (approximately 75.3% of 2018 GDP) at the end of September 2019. Domestic debt fell 3.4% y/y to US$1.13bln while foreign debt fell 0.6% y/y to US$1.28bln.

Outlook

The Centrale Bank van Aruba expects real GDP to slip by 0.7% in 2019 as the fiscal consolidation efforts under way

weigh on economic activity. Nevertheless, strong growth in tourism, particularly from the US, and the commencement of

large private sector projects (including Gateway 2030 and the St. Regis Hotel) are expected to increase economic activity

by close to 1.0% in 2020. Further, inflation is expected to slow in 2020 as the base-effect of tax increases ends.



Source: Centrale Bank van Aruba and CIBC FirstCaribbean. Source: Centrale Bank van Aruba and CIBC FirstCaribbean.

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The Bahamas Tiffany Grosvenor-Drakes CIBC FirstCaribbean


Real GDP likely continued to advance during the first nine months of 2019. However, following a strong performance

during the first eight months of 2019, the tourism sector has begun to experience Hurricane Dorian’s catastrophic impact.

Total visitor arrivals to The Bahamas advanced 13.1% y/y during January to August 2019, reflecting expansions in

both air (up 13.1% y/y) and sea (up 12.3% y/y) arrivals. Increased air arrivals to New Providence and Family

Islands of 17.0% y/y and 4.7% y/y, respectively, eclipsed an 11.3% y/y decline to Grand Bahama. Similarly, sea

arrivals to New Providence and Family Islands grew 20.2% and 11.4%, respectively, but arrivals to Grand

Bahama fell 13.0% y/y. In the aftermath of Hurricane Dorian, total visitor arrivals slumped 12.8% y/y in

September, reflecting declines of 14.7% y/y and 12.4% y/y in air and sea arrivals, respectively. Air arrivals to New

Providence, Grand Bahama and the Family Islands fell 7.7% y/y, 82.0% y/y and 37.6% y/y, respectively, while sea

arrivals contracted 8.3% y/y, 61.5% y/y and 7.9% y/y, respectively. Total room earnings declined y/y during the

month, but specifically for New Providence remained flat y/y. Nonetheless, over the nine-month period, air and

sea arrivals rose 11.6% y/y and 10.1% y/y respectively.

Increased domestic activity, along with small- and medium-scale foreign investment projects, likely sustained

construction output during January to September 2019. While commercial loan disbursements slipped during the

period, disbursements to the dominant residential sector increased 3.0% y/y. Further, the volume and value of

mortgage commitments increased 51.4% y/y and 81.2% y/y at September 2019.

The unemployment rate fell 0.5 percentage points y/y and 1.2 percentage points since November 2018 to 9.5% at May

2019. The number of employed persons increased 3.2% y/y. However, in late October 2019, the National Insurance Board

indicated that since Dorian approximately 1,700 persons had submitted claims for unemployment benefits.

Consumer price inflation slowed to 1.8% y/y during September 2019 as the prices of transport and housing, electricity, gas

and other fuels increased 11.8% y/y and 0.3% y/y, respectively, but the prices of food and non-alcoholic beverages and

miscellaneous goods and services fell 0.5% y/y and 1.5% y/y, respectively.

Developments in Financial Markets Faster deposit growth compared to lending increased excess liquidity over the 12 months ended September 2019.

Total loans advanced 1.5% y/y as an 8.3% y/y expansion in corporate lending outweighed a 0.7% y/y fall-off in

retail lending. Loans to businesses and the public sector rose 4.7% y/y and 12.5% y/y, respectively, but

mortgages and consumer loans declined 0.2% y/y and 1.4% y/y, respectively.

Retail, corporate and non-resident deposits rose 3.2% y/y, 6.0% y/y and 4.0% y/y, respectively, pushing total

deposits 4.4% higher y/y.

Chart 1 Growth in Tourist Arrivals


Source: Caribbean Tourism Organization and CIBC FirstCaribbean. Source: Central Bank of the Bahamas and CIBC FirstCaribbean.

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Commercial banks’ excess liquid assets rose 3.1% y/y to US$1.78bln at September 2019. However, the average

interest rate spread widened 206bps to 12.12% at the end of the same period, as the weighted average lending

rate increased 168bps to 12.73%, but the weighted average deposit rate fell 38bps to 0.61%. The private sector

non-performing loan ratio improved to 8.4% in September 2019 from 9.2% one year earlier.

The Central Bank’s external reserves rose 28.2% y/y to US$1.65bln at November 2019, approximately 14.8 weeks of 2020 projected imports of goods and services, partially reflecting re-insurance receipts following Hurricane Dorian.

Government Debt

During FY2018/19 ended June 2019 the fiscal deficit narrowed 46.4% y/y to US$222.4mln, in line with the government’s

target under its Fiscal Responsibility Law (FRL).

Total revenue increased US$373.6mln (18.3% y/y). Compliments of the rate hike, VAT receipts advanced

US$214.3mln (31.5% y/y), while taxes on international trade increased US$10.4mln (2.4% y/y) supported by gains

in departure taxes, and customs and other import duties. Further, following the reclassification of VAT on realty

taxes to stamp taxes, stamp taxes more than doubled to US$225mln, while business licence fees and receipts

from bank and trust companies rose US$31.8mln (28.1% y/y) and US$9.5mln (52.3% y/y), respectively. Non-tax

collections also expanded [up US$19.4mln (9.5% y/y)] during the period.

The Government increased its recurrent spending (up US$232.6mln), but growth-enhancing capital spending fell

US$51.6mln (19.2% y/y). Outlays on goods and services rose US$141.6mln (31.5% y/y), mostly attributed to the

settlement of arrears, while subsidies, social assistance, transfers and interest payments increased US$64.9mln

(19.8% y/y), US$20.3mln (12.3% y/y), US$21.7mln (16.8% y/y) and US$15.8mln (5.0% y/y), respectively.

However, compensation of employees declined US$17.6mln (2.4% y/y).

Since then, a 7.6% y/y expansion in revenue outpaced a 2.7% y/y hike in expenditure and slashed the government’s fiscal

deficit by one-third during Q1 of FY2019/20 ended September 2019.

National debt rose 2.8% y/y to US$8.26bln (66.9% of 2018 GDP) at September 2019. Central government’s external debt

and contingent liabilities fell 1.5% y/y and 5.3% y/y, respectively, but central government’s domestic debt rose 5.2% y/y.

Outlook The IMF’s latest estimates suggest that real economic growth in the Bahamas will likely remain positive (up 0.9%) in 2019 given the gains during the first eight months of the year, but contract by 0.6% in 2020. However, rebuilding and reconstruction work is projected to generate a 2.1% recovery in 2021. Further, the Central Bank of the Bahamas expects that following the initial fall-out, increased labour demand to facilitate reconstruction is likely to partially mitigate the impact of hurricane-related job losses on the rate of unemployment. Notwithstanding the recent improvement in government finances, the Minister of Finance now expects that the Government’s revenue loss coupled with the necessary capital outlays and spending on social services will likely produce a fiscal deficit of 5.3% of GDP for FY2019/20, about five times the Pre-Dorian target of 1% under the FRL. Additionally, in its 2019 Fiscal Strategy Report, the Government does not expect the fiscal deficit to return levels under the FRL until FY2024/25.

Chart 3 Foreign Direct Investment (January to June)


Source: Central Bank of the Bahamas and CIBC FirstCaribbean. Source: Central Bank of the Bahamas and CIBC FirstCaribbean.

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Barbados Tiffany Grosvenor-Drakes CIBC FirstCaribbean


The Central Bank of Barbados (CBB) reports that real GDP fell 0.1% y/y during 2019 as the improvement in tourism

output remained insufficient to compensate for the weak outturn of most other economic sectors.

Tourism GDP expanded 2.9% y/y. Total long-stay arrivals advanced 3.5% y/y, reflecting a greater number of

tourists from Barbados’ two largest source markets, the UK and the US, but arrivals from Canada and the

CARICOM dipped. Further, a recovery in cruise-ship calls during Q4 2019 led to a modest increase in cruise

passenger arrivals during the year.

Despite a 77.8% y/y increase in government capital spending to US$104.9mln, construction output is estimated to

have declined 4.7% y/y, in line with a fall-off in employment in that sector.

Reduced rainfall constrained agricultural production, which fell 6.4% y/y. Output of crops rose approximately 3%

due to a switch to more drought-resistant crops in H2 2019, but milk and chicken production declined during the

year. Further, fish landings contracted by more than 50%, primarily attributed to an influx of sargassum seaweed.

Despite a 0.2% y/y decline in the number of persons employed, the unemployment rate fell by 2.7 percentage points y/y to 8.9% during Q4 2019, due to a 4.6% y/y fall-off in the number of persons available and willing to work. Consumer prices rose 7.2% y/y during December 2019. The reduced fish landings and the effect of lower levels of rainfall on vegetable output drove up the price of food and non-alcoholic beverages (up 12.4% y/y), while the price of transport also increased during the period (up 11.1% y/y).

Developments in Financial Markets Deposit taking institutions’ (DTIs) total loans and advances rose 0.3% y/y over the 12 months ended November 2019. Specifically, lending by credit unions increased 3.3% y/y, but lending by banks and finance and trust companies slipped 0.5% y/y and 0.4% y/y, respectively. Total deposit balances expanded 3.7% y/y as a 6.8% y/y expansion in transferable deposits eclipsed a 10.2% y/y reduction in other (fixed deposits). Thus, excess liquidity continued to increase, with 18.4% of commercial banks’ deposits held as excess cash at the Central Bank at December 2019, compared to 15.2% one year earlier. Commercial banks’ weighted average loan rate declined 28bps y/y to 6.41%, while the average mortgage rate in particular fell 26bps y/y to 5.16% at September 2019. Meanwhile, the weighted average deposit rate remained unchanged at 0.15%.

Commercial banks’ non-performing loan ratio declined 0.8 percentage points y/y to 6.6%, but banks’ capital adequacy

ratio slipped marginally y/y to 13.4% at December 2019. At the same time, the 12-month return on average assets

recovered partially to 0.5%, compared to -0.2% at the end of 2018.

Chart 1 Key Economic Indicators (%)

Chart 2 Net Foreign Direct Investment (January - December US$mln)

Source: Central Bank of Barbados, Barbados Tourism Marketing Inc. and CIBC FirstCaribbean. Source: Central Bank of Barbados and CIBC FirstCaribbean.

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Gross international reserves rose to US$740.2mln, representing 18.7 weeks of import cover at December 2019 (from 12.8

weeks at December 2018), bolstered by US$75mln policy-based borrowing from the Caribbean Development Bank (CDB),

and the second and third tranches of IMF funding, totalling US$97mln during the year.

Government Debt The government’s fiscal surplus improved US$120.0mln to US$157.1mln during the first nine months of FY2019/20 ended December 2019. Further, the primary surplus increased US$56.9mln to 4.8% of GDP, with progress toward the 6% of GDP target for the full fiscal year.

An increased intake of property taxes was largely responsible for a US$32.6mln (3.4% y/y) expansion in tax

receipts. The hike in land tax rates led to a US$24.7mln expansion in property taxes to US$96.4mln, while

personal taxes also rose (up US$10.3mln or 6.6% y/y) during the period. However, corporate taxes and the

financial institutions asset tax fell US$6.1mln (6.0% y/y) and US$1.9mln (9.9% y/y), respectively, moderating the

increase in direct taxes to US$18.5mln. Further, indirect taxes rose US$14.2mln (2.4% y/y) as increased

collections of VAT (up US$17.1mln), import duties (up US$8.0mln), and other indirect taxes (up US$12.9mln)

eclipsed a US$24.7mln fall-off in the repealed NSRL. Non-tax revenue and grants also rose (up US$3.0mln)

during the period.

Current expenditure declined US$93.9mln (12.6% y/y). Interest payments fell US$63.1mln (39.9% y/y) to 8.9% of

revenue compared to 30.6% two years earlier, while government’s spending on transfers and subsidies fell

US$40.2mln (10.4% y/y). Grants to public institutions, in particular, fell US$65.2mln, largely reflecting lower

transfers to public entities now funded directly by the Health Service Levy, the Garbage and Sewage Contribution

fee, and the Airline Travel and Tourism Development fee. Meanwhile, wages and salaries fell US$1.6mln (0.5%

y/y), but expenditure on goods and services rose US$11.0mln (10.2% y/y). Further, capital spending and net

lending increased US$9.6mln to US$46.4mln during the period.

The improved fiscal surplus allowed for a reduction in government debt levels. Total gross public sector debt fell from US$6.43bln (126.3% of GDP) at December 2018 to US$6.22bln (119.5% of GDP) at December 2019, supported by the conclusion of the foreign currency debt exchange. Specifically, the stock of outstanding central government arrears declined US$181.8mln y/y to US$87.0mln at year-end. Further, on December 11, 2019, Standard and Poor’s upgraded Barbados’ long-term foreign currency sovereign credit rating from SD to B-.

Outlook The CBB projects growth in the range of 1.25% to 1.75% in 2020 hinged on the start-up of delayed capital investment projects and supported by continued expansions in tourism output. The government has made significant progress toward the attainment of its 6% primary surplus target for FY2019/20, which remains at the core of its fiscal consolidation programme. While the recent finalisation of the external debt restructuring indicates a resumption of external interest payments going forward, the CBB expects that the projected improvement in economic output, alongside continued international financial support, will lead to a further build-up in international reserves.


Chart 4 Developments in Credit Market Indicators (%)

Source: Central Bank of Barbados and CIBC FirstCaribbean. Source: Central Bank of Barbados and CIBC FirstCaribbean.

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Belize Tiffany Grosvenor-Drakes CIBC FirstCaribbean


The Statistical Institute of Belize indicates that economic activity fell 0.3% y/y and 0.4% y/y during Q2 and Q3 2019,

respectively, reflecting the effects of severe drought on agricultural output and hydroelectricity power generation, and a

Q3 fall-off in tourist arrivals. Consequently, real GDP growth slowed to 1.2% y/y during the first nine months of 2019.

The primary sector advanced 2.5% y/y, reflecting increased output of agriculture, hunting and forestry (up 1.8%

y/y), which more than offset an 8.4% y/y fall-off in fishing output. Sugar cane deliveries (long tons) and the

production of bananas rose 9.4% y/y and 8.7% y/y, respectively, but citrus deliveries (boxes) and production of

marine exports contracted 15.0% y/y and 9.0% y/y, respectively, during the period.

A 21.7% y/y fall-off in the production of electricity and water and a 16.1% y/y decline in construction activity

overshadowed a 3.8% y/y rise in manufacturing activity and reduced output in the secondary sector by 9.3% y/y.

Broad-based improvement increased activity in the tertiary sector by 3.9% y/y during the nine-month period. Hotel

and restaurant output expanded 1.1% y/y as the number of stay-over tourists and cruise ship disembarkations

rose 2.2% y/y and 2.1% y/y, respectively. Greater tourism activity likely contributed to increased output of

wholesale and retail trade (up 3.0% y/y), and transport and communication (up 4.7% y/y).

Greater earnings from all major export commodities except for citrus juice and crude oil pushed domestic export receipts

7.6% higher y/y. Gross imports rose 5.3% y/y, mainly reflecting expansions in fuels, lubricants and crude materials,

manufactured goods and other manufactures, oils fats and chemicals, and food beverages and tobacco. However,

spending on machinery and transport, and goods for designated processing areas fell 3.7% and 12.9% y/y, respectively.

The Statistical Institute of Belize reports that the employment rate rose from 7.7% in April 2019 to 10.4% in September

2019, despite a 3.4% y/y expansion in the number of employed persons. The labour force grew 6.6% over the period.

At November 2019, consumer prices remained on par with those one year earlier as higher prices for food and non-

alcoholic beverages and transport offset lower prices for housing, water, fuel and power.

Developments in Financial Markets

Excess liquidity declined over the 12 months to November 2019, reflecting faster growth in loans relative to deposits.

Increased lending to the public utilities (up 17.9% y/y), tourism (up 18.2% y/y), building and construction (up 2.8%

y/y), and distributions (up 2.0% y/y) sectors lifted total non-personal loans 5.8% y/y. Further, personal lending

advanced 7.6% y/y, leading to a 6.2% y/y expansion in total loans.



Source: Central Bank of Belize, Caribbean Tourism Organization and CIBC FirstCaribbean. Source: Central Bank of Belize and CIBC FirstCaribbean.

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Total deposit balances also rose (6.0% y/y), reflecting higher corporate and retail deposits (up 6.3% y/y and 5.5%

y/y, respectively), which eclipsed a 2.2% y/y dip in non-resident deposits.

Consequently, the loan-to-deposit ratio rose marginally y/y to 78.8% at November 2019. The weighted average lending rate rose 4bps y/y to 9.00%, while the weighted average deposit rate increased 1bps y/y to 1.27%, increasing the spread to 7.73%, at the end of the same period. Gross official international reserves declined 10.2% y/y to US$258.0mln or 11.9 weeks of 2018 imports of goods and services at November 2019, just below three months of imports of goods and services.

Government Debt

Revenue collections declined and government spending increased, resulting in a US$29.0mln worsening of the fiscal

balance to a US$4.3mln deficit during the first four months of FY2019/20 ended July 2019.

Total revenue and grants declined US$7.0mln (3.4% y/y). Tax receipts slipped US$0.4mln (0.2% y/y) as taxes on

income and profits and on property increased US$1.7mln (3.4% y/y) and US$0.5mln (43.0% y/y), respectively, but

taxes on goods and services and on international trade and transactions fell US$1.6mln (1.6% y/y) and

US$0.9mln (3.4% y/y), respectively. Further, non-tax receipts and grants also declined, down US$5.4mln (20.9%

y/y) and US$1.7mln (67.4% y/y), respectively. However, capital revenue registered a US$0.5mln uptick (127.2%

y/y) during the four-month period.

Similar expansions in current and capital spending lifted total expenditure by 12.0% y/y to US$204.8mln.

Increased outlays on wages and salaries (up US$2.6mln), goods and services (up US$4.6mln), and subsidies

and current transfers (up US$2.4mln) outweighed a US$0.3mln fall-off in pension payments, pushing total current

expenditure 6.8% higher y/y. Likewise, capital spending rose US$11.0mln (49.9% y/y) during the period.

Central government’s domestic debt increased 5.9% y/y to US$556.7mln, while the public sector’s external debt rose

1.6% y/y to US$1.29bln. Consequently, total public sector debt increased 2.8 percentage points y/y to 98.7% of 2018

GDP at November 2019.

Outlook

The IMF notes that the economic recovery in Belize is continuing, albeit at a slower pace due to severe drought

conditions, and projects real GDP growth of 1.5% in 2019. The current account deficit is expected to remain wide and

international reserves are projected to remain around three months of imports over the medium term. While the

Government has made progress with fiscal adjustment over the last two years, the IMF cautions that the primary surplus

target of just over 2% of GDP for FY2019/20 could be in jeopardy given the weak revenue performance and increased

spending thus far. Further, the IMF believes that a bigger primary surplus target is required in order to restore sustainable

fiscal balances and reduce public debt levels.

Chart 3 Foreign Direct Investment (January–June)

Chart 4 Developments in Credit Market Indicators (y/y; %)

Source: Central Bank of Belize and CIBC FirstCaribbean. Source: Central Bank of Belize and CIBC FirstCaribbean.

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Bermuda Tiffany Grosvenor-Drakes CIBC FirstCaribbean

Production, Prices, and Employment The Government of Bermuda reports real GDP expansions of 3.7% y/y and 3.3% y/y in Q1 and Q2 2019, respectively, led by increased gross capital formation. Since then, preliminary indicators suggest a likely continuation of these trends.

Cruise passenger arrivals advanced 13.4% y/y during January to September 2019, but air arrivals to Bermuda

dipped 4.5% y/y, in line with a 4.8% y/y reduction in seating capacity. Air arrivals from all major markets fell, with

the number of tourists from the US, the UK, Canada, Europe, the Caribbean, Asia and all other markets declining

5.9% y/y, 3.2% y/y, 3.1% y/y, 5.4% y/y, 5.6% y/y, 17.9% y/y and 36.1% y/y, respectively. However, the total

average length of stay rose 1.5% y/y, while total air visitor spending increased 3.8% y/y. Meanwhile, yacht

passenger arrivals slumped 31.5% y/y during the period.

Total retail sales decreased 1.5% y/y during January to July 2019, while new registrations of international

business companies and partnerships fell 19.2% y/y over the first nine months of the year. Further, the total value

of new construction project starts declined 19.3% y/y over H1 2019 as publicly funded projects that commenced in

H1 2018 did not reoccur. However, the estimated value of construction work rose 20.3% y/y, largely reflecting

work on hotels and guesthouses. Further, increased imports of machinery and finished equipment boosted total

goods imports 15.2% y/y during H1 2019.

The results of the May 2019 Labour Force Survey Report indicate that the overall unemployment rate rose from 4.5% in

November 2018 to 5.2% in May 2019, but remained unchanged y/y. Specifically, the unemployment rate for Bermudians

increased from 4.8% to 5.6% over the six-month period.

Consumer prices rose 0.8% y/y during September 2019 as the prices of food, health and personal care, and rent

increased 2.9% y/y, 3.8% y/y and 1.7% y/y, respectively, but the price of transport and foreign travel fell 5.0% y/y.


Excess liquidity fell marginally over the four quarters to June 2019 as a fall-off in deposits outweighed a decline in loan

balances. Capital adequacy, loan quality and profitability improved during the same period.

Total loans and advances declined 1.2% y/y to US$8.1bln. Real estate-related lending and loans to other financial

institutions increased from 52.5% and 16.1% to 54.0% and 17.8% of total loans, respectively, but loans to other

businesses and services and all other loans fell from 5.8% and 25.6% to 5.3% and 22.8% of total loans,

respectively.

Total deposits also fell (down 4.2% y/y) as a 7.9% y/y fall-off in savings deposits and a 14.3% y/y decline in

demand deposits eclipsed a 38.5% y/y expansion in time deposits.

Chart 1 Real GDP Growth (%)

Chart 2 Total Tourist Arrivals

Source: Government of Bermuda and CIBC FirstCaribbean. Source: Government of Bermuda and CIBC FirstCaribbean.

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As a result, the loan-to-deposit ratio rose marginally y/y to 44.1% at the end of June 2019. The non-performing

loan ratio improved from 5.9% to 5.7%, while the Basel III Risk-to-Asset ratio rose 1.2 percentage points y/y to

24.3% at the end of June 2019. However, the annualised return on assets fell from 2.0% to 1.5% over the same

period.

Government Debt

The Government of Bermuda reports that the fiscal deficit narrowed US$39.2mln to US$7.6mln during the first six months

of FY2019/20 ended September 2019.

Total revenues advanced 1.4% y/y to US$545.4mln, marginally below budget estimates. Higher collections of

customs duty, payroll tax, foreign currency purchase tax, telecommunication receipts and passenger tax eclipsed

lower receipts of land tax, hotel occupancy tax, stamp duty, civil aviation and all other receipts.

Total spending fell US$31.0mln (5.3% y/y), but increased 0.9% y/y when debt service is excluded. Interest

payments declined 5.8% y/y to US$58.3mln or 10.7% of revenue, reflecting declining debt and strategic liability

management by the Government. In contrast, capital outlays rose US$4.4mln.

Gross debt at the end of September 2019 was recorded at US$2.7bln (US$2.56bln net of the sinking fund) and 42.3% of

2018 GDP.

Outlook

S&P’s most recent outlook for Bermuda remains positive with economic growth expected to strengthen to 1% in 2019.

Specifically, sustained growth in the tourism and construction sectors is expected to support economic activity over the

next two years. However, unforeseen weaknesses in the tourism or international services sectors could generate a flat or

negative performance. Even though the Government incurred additional borrowing to discharge its commitment to the

lenders of the Caroline Bay project as guarantor, S&P expects that the ongoing fiscal consolidation will likely balance the

budget in the current FY2019/20, enabling a downward trajectory in the debt position.

Chart 3 Current Account Balance/GDP (%)

Source: Government of Bermuda and CIBC FirstCaribbean.

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Cayman Islands Tiffany Grosvenor-Drakes CIBC FirstCaribbean

Following a 3.3% expansion in 2018, the Cayman Islands Economic and Statistics Office estimates that increased activity

across all sectors pushed real GDP 3.0% higher y/y during Q1 2019. Since then, preliminary indicators suggest a

continuation of these trends.

Tourism output expanded 7.9% y/y in Q1 2019, largely reflecting an 8.7% y/y expansion in air arrivals, which

outweighed the effect of a 4.6% y/y fall-off in the number of cruise arrivals. Air arrivals from the US and Canada

rose 9.9% y/y and 14.9%, respectively, but arrivals from Europe and all other markets fell 3.4% y/y and 13.0% y/y,

respectively. Since then, the number of stay-over tourists rose 9.1% y/y during January to November 2019, but

cruise passenger arrivals continued to slide, down 6.2% y/y, corresponding to a 7.0% reduction in the number of

cruise ship calls.

Real construction value-added expanded 5.8% y/y. Boosted by increased activity in the residential sector, the

number and value of building permits surged 70.2% y/y and 117.3% y/y, respectively, while the number and value

of project approvals recovered modestly during the quarter, up 32.8% y/y and 81.4% y/y, respectively, following

sharp declines the previous year. Meanwhile, real estate activity is estimated to have increased 5.2% y/y, even

though the number and value of property transfers declined 14.9% y/y and 22.3% y/y, respectively. Electricity and

water supply output also increased (up 2.8% y/y), reflecting greater water (up 1.3% y/y) and electricity production

(up 4.3% y/y).

The single largest sector, finance and insurance services, advanced 1.7% y/y despite continued weaknesses in

domestic credit and the offshore sub-sector. The number of registered mutual funds increased 4.0% y/y, while the

number of stocks listed on the Cayman Islands Stock Exchange and the market capitalization rose 35.4% y/y and

36.3% y/y, respectively, at March 2019. However, all other indicators of financial services registered declines

during the quarter. The number of licensed bank and trust companies, trust companies and insurance companies

fell 10.7% y/y, 3.4% y/y, and 3.8% y/y, respectively, while the number of new partnerships and new company

registrations declined 5.7% y/y and 23.9% y/y, respectively. Further, reduced lending to both the public and

private sectors lowered net domestic credit 7.3% y/y. Since then, the number of licensed bank and trust

companies and insurance companies dipped 9.6% y/y and 6.3% y/y, respectively, but the number of mutual funds

edged upward 0.4% y/y during January to September 2019.

During Spring 2019, the unemployment rate fell 0.4 percentage points y/y to 3.0%, as the labour force expanded 7.7% y/y, but the number of employed individuals rose 8.2% y/y. Consumer prices rose 3.4% y/y at June 2019 as the prices of food and non-alcoholic beverages, and housing utilities increased 1.5% y/y, and 10.4% y/y, respectively, but the price of transport declined 8.8% y/y.


Chart 2 Tourism Indicators

Source: Cayman Islands Economic and Statistics Office and CIBC FirstCaribbean. Source: Cayman Islands Economic and Statistics Office, Caribbean Tourism Organization and CIBC FirstCaribbean.

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Retail banks’ total loans to residents fell 3.5% y/y over the 12 months ended September 2019. Lending to businesses and

the Government declined 8.8% y/y and 35.6% y/y, respectively, lowering corporate loan balances 14.8% y/y. In contrast,

total retail loans rose 4.0% y/y, reflecting expansions of 3.7% y/y and 5.4% y/y in mortgages and consumer loans,

respectively.

Total deposits of residents rose 8.2% y/y, as corporate deposits increased 11.7% y/y, but retail deposits fell 1.0% y/y

during the same period.

Consequently, liquidity expanded during the period. Meanwhile, the average interest rate spread on KYD loans and

deposits narrowed 57bps y/y to 6.87% at March 2019. The weighted average lending rate fell 17bps y/y to 7.52%, while

the weighted average deposit rate increased 40bps y/y to 0.65%.

Government Debt Cayman Islands’ fiscal surplus improved 9.7% y/y to US$246.0mln, despite an US$11.2mln (5.8% y/y) rise in government spending during Q1 2019.

Total revenue advanced 7.9% y/y, reflecting higher collections of tax (up US$30.1mln) and other revenue (up

US$2.5mln), the latter largely because of increased investment receipts. Taxes on international trade and

transactions and goods and services rose US$12.2mln (21.4% y/y) and US$20.6mln (6.5% y/y), but property

taxes fell US$2.6mln (11.9% y/y).

Current spending rose US$10.4mln (5.8% y/y) to US$191.2mln. Outlays on compensation of employees, goods

and services, and subsidies increased US$8.0mln (9.6% y/y), US$0.2mln (0.9% y/y) and US$6.5mln (16.0% y/y),

respectively. However, expenditure on social benefits, interest payments, depreciation and other expenses

declined US$2.6mln (23.9% y/y), US$0.1mln (1.7% y/y), US$1.2mln (12.5% y/y) and US$0.4mln (12.5% y/y),

respectively. Net capital expenditure and net lending advanced US$0.7mln y/y to US$11.3mln during the quarter.

Total Central Government debt declined 6.7% y/y to US$500.9mln (9.1% of 2018 GDP) at the end of March 2019, compared to US$536.6mln (10.4% of GDP) one year earlier.

Outlook The Cayman Islands Economics and Statistics Office (ESO) projects a deceleration of real GDP growth to 2.6% in 2019. Notwithstanding, increased activity in the tourism, construction and auxiliary sectors is likely to sustain the expansion, with the continuation of major medium-term projects supporting construction activity in particular. Further, consumer prices will likely rise by 2.9%, while the unemployment rate is projected to edge upward to 3.5% by year-end.



Source: Cayman Islands Economic and Statistics Office and CIBC FirstCaribbean. Source: Cayman Islands Economic and Statistics Office and CIBC FirstCaribbean.

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Chart 5 Growth in Corporate Loans and Mortgages (y/y; %)

Chart 6 Interest Rates (%)

Source: Cayman Islands Economic and Statistics Office and CIBC FirstCaribbean.

Source: Cayman Islands Economic and Statistics Office and CIBC FirstCaribbean.

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Costa Rica Luis Hurtado CIBC Capital Markets

Production, Prices and Employment

Q3 2019 GDP growth came in at 2.3% y/y, bouncing back from the 0.6% posted in Q2 but still below the 2.6% y/y posted

in Q3 2018. The latest numbers suggest 2019 GDP growth will come in at 1.9%, below the 2.6% reached in 2018.

Looking at Q1 2019 GDP by expenditure, government consumption surged 5.5% y/y driven by health sector

hiring. The jump responded to the base effect created by the public sector strike during the months of August and

September 2018. Exports increased 2.7% y/y on the back of a 3.6% y/y gain in services exports, while private

consumption continued its sluggish growth, coming in at 1.6% y/y, in line with low consumer confidence and a

high unemployment rate (11.4%). On the other hand, gross fixed capital formations declined 5.4% as public and

private investment dropped in tandem with pessimistic business confidence.

By industry, real estate activities (+3.8% y/y), agriculture, forestry and fishing (+3.2% y/y), and manufacturing

(+2.9% y/y) led growth in Q3 2019. Nevertheless, construction remained in negative territory, dropping 15.2% y/y,

while mining and quarrying, utilities and wholesale and trade also posted declines of 8.5% y/y, 0.4% y/y, and

0.3% y/y, respectively.

Recent data point to an improvement in Q4 2019, in line with the rebound in growth from the lower base effects of the

public sector strike in Q4 2018. Economic activity came in at 3.5% y/y and 2.6% and 3.2% y/y in October, November, and

December, respectively. Manufacturing, (up 7.8% y/y), health and education services (up 7.1% y/y), and information and

communications (up 6.7% y/y) led the way in December, while the construction sector maintained a negative trend,

dropping 12.2% y/y, driven by lower government and private investments in the sector.

December inflation came in at 1.5% y/y (-0.12% m/m), down from November’s 1.9% y/y and October’s 2.1% y/y but still

below the central bank’s 3% target. Food and non-alcoholic beverages (-0.6% m/m), communications (-0.6% m/m), and

transportation (-0.6% m/m) contributed the most to the monthly price drop in December.

In January the BCCR cut the overnight rate by 50 bps to 2.25%, making it the eight rate cut since February 2018 for a

total of 300bps. In its announcement, the central bank highlighted low economic growth, a high unemployment rate and

low credit and monetary aggregates growth as the main reasons behind its decision.

The unemployment rate came in at 11.4% in Q3 2019, 1.2 percentage points above Q3 2018. The number of employed

people reached 2,162,613 in Q3 2019, dropping 24,773 y/y, while the participation rate came in at 61.8%, above the

61.1% posted in Q3 2018.

Table 1 Key Economic Indicators & Forecast

Chart 1 Real GDP (y/y; %)

Key Annual Indicators 2016 2017 2018 2019F 2020F

Real GDP Growth 4.2% 3.4% 2.6% 1.9% 2.5%

Inflation (End of Period) 0.8% 2.6% 2.0% 1.5% 2.5%

Prim. Central Govt Fiscal Balance (% GDP) -2.3% -3.1% -2.3% -2.7% -1.5%

Nom. Central Govt Fiscal Balance (% GDP) -5.1% -6.2% -5.9% -7.0% -6.0%

Exchange Rate (USD/CRC) 553.0 566.0 603.0 569.0 600

Policy Interest Rate (End of Period) 1.75% 4.75% 5.25% 2.75% 2.0%

Current Account (% of GDP) -2.6% -3.1% -3.1% -2.5% -2.2%

Central Gov't Debt/GDP 45% 49% 54% 58.5% 61%

Source: Ministerio de Hacienda, IMF and CIBC Capital Markets – FICC Strategy Source: Bloomberg

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Government Debt

December central government revenue came in at CRC714.6bln (-10.6% y/y) and total expenses reached CRC1.1tln

(+18.1% y/y). With these numbers, central government revenues landed at CRC5.4tln or up 8.1% in 2019, while total

expenses reached CRC7.9tln or up 12.7%. The 2019 nominal deficit came in at 7% of GDP, deteriorating from the 6.3%

of GDP posted in November and the 5.8% deficit posted at the end of 2018. The 12-month primary deficit also

deteriorated to 2.8% of GDP from the 2.3% in 2018.

The numbers by the Ministry of Finance showed a solid improvement in 2019 total revenues (up 8.1% vs 4.4% in 2018)

driven by the 9.2% and 23.0% y/y increases in income tax and sales tax revenues, respectively. This increase

corresponded to the implementation of the fiscal reform approved by the Costa Rican government in 2018. Nevertheless,

the improvement in the revenues has yet to translate into lower fiscal deficits as Costa Rica battles a high interest

expense burden (up 23.5%) and increasing capital expenditures (up 50% y/y), in line with the government’s efforts to

boost sluggish growth and reduce the high unemployment rate. Moreover, despite the implementation of the fiscal rule,

we have also seen an acceleration of current expenditures to 9.4% in 2019, 2.9 p.p. higher than the increase in current

expenditures in 2018.

Recent Revenue Numbers Show Improvement but Compliance With Fiscal Targets Remains Unlikely

We point out that the consolidation efforts under the fiscal reform depend on the fiscal rule, with the government

estimating savings of 2% of GDP - an optimistic figure as both judicial and education sectors fight and in some cases

ignore that directive of the fiscal responsibility law. We add that there are some concerns with respect to the composition

of the 2020 Budget. The Comptroller report in September showed that without a change in the way the government has

been classifying transfers, current expenditures would have grown 6% in the 2020 Budget, larger than the 4.6% allowed

by the fiscal responsibility law. We expect this concern to remain throughout 2020 and accentuate in 2021 as stricter

expenditure rules kick in and central government debt jumping above 60% of GDP. Note that the Ministry of Finance

launched a proposal to reduce debt without firing people, increasing taxes or reducing expenditures. Instead, it will use

public institutions surpluses (0.6% of GDP) and/or sell BICSA and Fabrica Nacional de Licores. This action fails to

address the main problem in the fiscal deficit: public expenditure.

Outlook

We see 2019 growth landing at 1.9% and slight rebound to 2.5% in 2020, consistent with the latest economic data

releases and our previous downward bias comments. With regards to the fiscal deficit and financial needs for this year,

with different sectors’ reluctance to fully adhere to the fiscal rule, we see the return of fiscal compliance concerns into

2020 and above-target nominal fiscal deficits.


Chart 3 Government Debt and Deficits

Source: Central Bank of Costa Rica Source: IMF, CIBC Capital Markets – Macro Strategy

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Curaçao Tiffany Grosvenor-Drakes CIBC FirstCaribbean


Despite the recent strengthening of the tourism sector, the decline in activity at the Isla refinery continued to weigh on

Curaçao’s economic performance. Following a 1.0% y/y decline during Q1 2019, the Centrale Bank van Curaçao en Sint

Maarten (CBCS) estimates real value-added contracted 1.3% in Q2 2019.

An expansion in ship repair activity was insufficient to stave off the effect of the protracted decline in oil refining

activity. Consequently, real value-added in manufacturing sector contracted 11.6% y/y. Further, construction

output also fell (down 0.6% y/y), largely reflecting reduced maintenance at the Isla refinery and a decline in capital

spending by the government.

Transport storage and communication output declined 1.1% y/y as a contraction in harbour-related activity

overshadowed increased airport-related activity. The number of container movements, freighters and cruise-ships

increased, but the retreat of production at the Isla refinery led to a sharp fall-off in the number of oil tankers

entering the port of Curacao. Meanwhile, greater commercial landings, air passenger arrivals and departures

increased airport activity but was moderated by a reduction in air transportation services, largely reflecting the

shutdown of domestic carrier Insel Air in February 2019.

In contrast, real tourism GDP surged 10.6% y/y as the number of stay-over and cruise-ship passenger arrivals

advanced 16.9% y/y and 7.1% y/y, respectively. Stay-over arrivals from North America, Europe, Latin America

and the Caribbean rose 3.0% y/y, 14.4% y/y, 43.8% y/y and 70.5% y/y, respectively. Since then, total stay-over

arrivals and visitor nights increased 13.0% y/y and 11.7% y/y, respectively, during January to August 2019.

Arrivals from all major markets rose, but arrivals specifically from Venezuela continued to plummet (down 20.7%

y/y), while arrivals from Aruba slipped 1.4% y/y.

Consumer price inflation advanced 2.7% y/y during August 2019, reflecting higher prices recorded for all major categories.

Specifically, the price of food, housing, and transport and communication rose 6.7% y/y, 3.5% y/y and 0.7% y/y,

respectively.

The unemployment rate increased from 13.4% at the end of 2018 to 21.2% in April 2019 as the number of employed

persons fell 5.1% alongside a 4.2% rise in the labour force over the four-month period.


Growing loan balances amid stagnant deposits reduced excess liquidity over the 12 months ended October 2019.

Greater corporate and retail lending lifted total loans and advances 5.8% y/y. Lending to businesses advanced

7.4% y/y, while a 5.8% y/y expansion in mortgages and a 0.4% y/y uptick in consumer loans increased retail loan

balances by 3.2% y/y.



Source: Central Bank of Curaçao and St. Maarten and CIBC FirstCaribbean. Source: Central Bank of Curaçao and St. Maarten and CIBC FirstCaribbean.

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A 2.2% y/y increase in corporate deposits counterbalanced declines of 2.8% y/y and 2.6% y/y in retail and non-

resident deposits, respectively, to keep total deposit balances unchanged from one year earlier.

Consequently, the loan-to-deposit ratio increased 4.4 percentage points y/y to 80.4% at October 2019.

The gross official FX reserves of the Monetary Union, excluding gold, rose 1.3% y/y to US$1.26bln (16.8 weeks of imports

of goods and services) at October 2019, but remained below the levels recorded two years ago (about 22 weeks of

imports of goods and services).

The CBCS continued to adjust its monetary policy, citing the overall downward trajectory of FX reserves and continued

excess liquidity in the banking system. Following the reintroduction of biweekly auctions of Certificates of Deposits (CDs)

in August 2019, the CBCS introduced weekly auctions with a two-week term to replace the four-week CDs, effective

January 31 2020. Further, the bank increased its reserve requirement from 18% to 19%, effective the reserve requirement

period February 17 to March 15, 2020.

Government Debt

A US$10.9mln expansion in revenue coupled with an US$8.9mln reduction in expenditure improved the government’s

budget surplus to US$24.4mln during H1 2019.

Tax receipts rose US$20.0mln (4.8% y/y), but non-tax revenue slipped US$9.1mln (21.0% y/y), moderating the

expansion in total revenue (up 2.4% y/y) to US$467.3mln. Taxes on income and profits, property and goods and

services increased US$9.4mln (5.1% y/y), US$4.4mln (28.6% y/y) and US$7.2mln (4.3% y/y), respectively.

However, taxes on international trade and transactions declined US$1.5mln (3.3% y/y).

Public spending declined 2.0% y/y to US$442.9mln. Expenditure on wages and salaries, goods and services,

transfer and subsidies and interest payments fell US$2.1mln (1.0% y/y), US$6.4mln (15.2% y/y), US$0.9mln

(0.5% y/y) and US$0.4mln (2.7% y/y), respectively. In contrast, other expenditure rose US$0.9mln (3.6% y/y).

Public debt declined 2.2% y/y to US$1.60bln (50.8% of GDP) at June 2019, largely reflecting a decline in domestic debt.

Domestic debt fell 21.5% y/y to US$256.7mln, mostly due to the repayment of arrears to the public pension fund, APC.

However, external debt increased 2.6% y/y to US$1.34bln.

Outlook

The economy of Curaçao remains in a prolonged recession despite robust tourism growth. The CBCS revised downward

its forecast for 2019 real GDP growth by 0.4 percentage points to 2.2%, citing the dampening effects of increased excises

on tobacco, liquor, wine and beer, and the hike in sales tax on imports from 6% to 9% that came into effect from

September 1, 2019. According to public reports, the Geneva-based Klesch Group has signed an agreement to own and

operate the Isla refinery following the expiry of PDVSA’s lease at the end of 2019. However, uncertainty remains

regarding the operations of the refinery throughout the transition period until the deal reaches a close.


Source: Central Bank of Curaçao and St. Maarten and CIBC FirstCaribbean.

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Dominica Tiffany Grosvenor-Drakes CIBC FirstCaribbean


Preliminary data from the Eastern Caribbean Central Bank (ECCB) suggests that Dominica’s economic recovery

strengthened during H1 2019. However, indicators imply that the post-Hurricane Maria boost in investment activity likely

reached its peak during the period.

Total visitor arrivals and total visitor expenditure rebounded 310.7% y/y and 97.9% y/y, respectively, during

January to June 2019. The number of stay-over arrivals, cruise-ship passengers and excursionists grew 71.2%

y/y, 759.6% y/y and 237.4% y/y, respectively, but the number of yacht passengers fell 13.0% y/y. Stay-over

tourists from all major markets recovered, with arrivals from the US, the UK, Canada, the Caribbean, and all other

countries advancing 27.0% y/y, 59.2% y/y, 25.8% y/y, 78.1% y/y, and 103.8% y/y, respectively.

Construction and investment indicators suggest a mixed performance during H1 2019. Imports of inedible crude

material except fuel, and machinery and transport equipment declined 4.2% y/y and 16.6% y/y, respectively,

following double-digit expansions one year earlier. However, government spending on capital works advanced

US$2.1mln (2.5% y/y), complementing greater tourism-related private sector construction, which was supported

by an increase in residential housing starts to 82 from 20 during H1 2018.

The production of bananas, non-banana crops and livestock likely registered improved output, as the domestic

exports of food and live animals recovered 329.6% y/y, but a 60.5% y/y slump in chemicals and related products

suggests weak manufacturing output. The production of bananas in particular likely rebounded in light of major

replanting following the passage of Hurricane Maria.

Total exports advanced US$4.5mln, but total imports rose US$14.1mln and led to a US$9.6mln (7.0% y/y) widening of the

merchandise trade deficit.

Consumer prices rose 1.2% y/y in September 2019, reflecting higher prices of food and non-alcoholic beverages (up 2.8%

y/y), housing utilities and gas and fuels (up 0.9% y/y) and transport (0.4% y/y).


Banks’ loan quality and profitability improved during the 12 months to September 2019. Excess liquidity fell over the same

period, reflecting declining deposit balances and increased lending.

Retail loans fell 3.8% y/y, but an 11.5% y/y expansion in corporate lending, driven by a surge in lending to the

public sector, lifted total loans 4.6% y/y. Loans to the public sector increased 121.4% y/y, but loans to businesses

fell 11.5% y/y.

Total deposits declined 9.7% y/y, reflecting lower balances of retail (down 3.1% y/y), corporate (down 16.5% y/y),

and non-resident deposits (down 9.3% y/y).




45

55

65

75

85

95

105

0

500

1,000

1,500

2,000

2,500





-6

-4

-2

0

2

4

6

8

-4-3-2-10123456789

101112

2014Q3 2015Q3 2016Q3 2017Q3 2018Q3 2019Q3

All Items (L)Food (L)Fuel and Light (R)



Consequently, the loan-to-deposit ratio rose 7.0 percentage points y/y to 51.1% at September 2019. The average

interest spread fell 23bps y/y to 5.75% as the weighted average lending rate fell 17bps y/y to 7.47% but the

weighted average deposit rate rose 6bps y/y to 1.72%.

Banks’ non-performing loans-to-total loans ratio improved 4.3 percentage points y/y to 12.2% at September 2019,

while the annualised return on assets increased from -2.61% to 0.58%.

Government Debt The fiscal deficit worsened US$35.3mln to US$62.9mln during H1 2019 as a 38.9% y/y slump in CBI inflows overshadowed a 15.8% y/y expansion in tax revenues, alongside increased government spending.

A US$25.0mln (33.0% y/y) fall-off in non-tax revenue, largely reflecting a US$27.9mln contraction in CBI receipts,

eclipsed an US$11.4mln expansion in tax revenue and lowered total current revenue US$13.5mln (9.1% y/y).

Taxes on domestic goods and services fell US$0.1mln (0.2% y/y), but taxes on international trade transactions,

income and profits, and property rose US$3.2mln (19.8% y/y), US$7.8mln (89.0% y/y) and US$0.6mln (47.0%

y/y), respectively.

Spending on personal emoluments fell US$0.6mln (2.1% y/y), but all other categories of current spending

increased the total 21.8% y/y during H1 2019. Expenditure on goods and services, interest payments, and

transfers and subsidies rose US$2.4mln (35.3% y/y), US$0.3mln (4.3% y/y) and US$13.9mln (71.4% y/y),

respectively. Further, capital outlays advanced US$2.1mln (2.5% y/y), attributed to continued reconstruction work

on the island.

Total public sector debt rose 10.4% y/y to US$440.6mln and 7.6 percentage points to 80.0% of GDP at the end of June 2019.

Outlook

The ECCB expects a strengthening of Dominica’s economic recovery from the 2017 devastation of Hurricane Maria over

the second half of 2019, underpinned by greater tourism, construction and agricultural output. The hosting of the World

Creole Music Festival in October should support tourism demand, while the ongoing reconstruction work by the public

sector and the continuation of private projects, such as the Tranquility Bay Beach Hotel and Jungle Bay Villas, is likely to

sustain growth of construction output. However, the ECCB expects a deterioration of the fiscal balance in 2019 due to the

government’s recovery efforts, which could likely be exacerbated if the slump in CBI receipts continues during H2 2019.




340

360

380

400

420

440

460

2015Q2 2016Q2 2017Q2 2018Q2 2019Q2

(US$mln)

-20

-10

0

10

20

30

40

2014Q3 2015Q3 2016Q3 2017Q3 2018Q3 2019Q3

Loans

Deposits



Dominican Republic Luis Hurtado CIBC Capital Markets

Production, Prices and Employment

Q3 2019 GDP growth landed at 4.8% y/y, accelerating from the 3.7% y/y posted in Q2 2019 but still below the 5.7%

reached in Q1 2019. With this number, Q1-Q3 2019 GDP increased 4.7% y/y, while preliminary Q4 2019 numbers from

Banco Central de la Republica Dominica (BCRD) estimate that 2019 growth reached 5.1%, the highest in Latin America.

Looking at the Q3 results, private consumption (+4.8% y/y), fixed capital formation (+8.9% y/y) and public

consumption (+4.8% y/) all posted solid gains, while exports declined 3.1% y/y. The increase in private

consumption responded to the monetary policy easing since May 2019 and the low inflationary pressures in the

country. The recovery in fixed capital formation growth came along with the jump in construction activity during

Q1-Q3 2019 as private investments in the housing, tourism, commercial, and energy sectors continued.

By Industry, financial and insurance activities, construction, and manufacturing increased the most with growth

rates of 11.7% y/y, 9.4% y/y and 4.1% y/y, respectively. On the other hand, communications and hotel, bars, and

restaurants were the only sectors posting declines in Q3 2019, coming in at -9.7% y/y and -5.7% y/y, respectively.

The Q3 2019 current account posted a deficit of US$750mln, deteriorating from the US$566 deficit recorded in Q3 2018

and the US$295mln deficit of Q2 2019. With this number, the 12-month current account deficit landed at 1.6% of GDP,

deteriorating from the 1.4% deficit posted at the end of 2018 and the 1.4% deficit reached on the 12 months ending in

June 2019. The negative performance of the current account deficit responded to the 3.0% y/y expansion in non-oil

imports to US$12.4bln during the Q1-Q3 2019 period, while exports reached US$8.4bln during the same period,

increasing 6.1% y/y. More recent data show that remittances maintained a solid performance, increasing 9.1% in 2019,

while tourist arrivals maintained the negative trend initiated in H2 2019 and dropped 1.9% in 2019.

December inflation came in at +3.7% y/y (0.2% m/m), remaining below the BRCD 4.0% target. Core prices reached

+2.3% y/y. Looking at inflation by groups of goods and services, alcoholic beverages and tobacco, non-alcoholic

beverages and food, and education services presented the largest increases in prices in December, coming in at 7.3%

y/y, 7.1% y/y, and 4.6% y/y, respectively. On the other hand, footwear and clothing (-2.8% y/y) and communications

(-0.1%) were the only items posting declines.

On January 31, the BCRD maintained the overnight rate at 4.5%, for the fifth consecutive month. The central bank cited

below-target inflation, inflation expectations around target in 2020, and the greater dynamism in the local economy

following the monetary policy easing implemented at the end of June as the main reasons to keep rates unchanged in

January.



Key Annual Indicators 2016 2017 2018F 2019F 2020F

Real GDP Growth 6.5% 4.6% 7.0% 5.1% 5.5%

Inflation (End of Period) 1.7% 3.3% 1.2% 4.9% 4.5%

NFPS Primary Fiscal Balance (% GDP) -0.6% -0.9% 0.3% 0.2% 0.2%

NFPS Nominal Fiscal Balance (% GDP) -3.3% -3.5% -2.4% -2.7% -2.7%

Exchange Rate (USD/DOP) 46.7 48.1 50.2 52.9 54.5

Policy Interest Rate (End of Period) 5.50% 6.0% 5.5% 4.5% 4.25%

NFPS Debt (% of GDP) 35.3% 36.9% 37.6% 38.6% 40%

Source: Bloomberg, BCRD, Ministerio de Hacienda, and CIBC Capital Markets Source: Bloomberg

-4%

-2%

0%

2%

4%

6%

8%

10%

Dec-08 Dec-10 Dec-12 Dec-14 Dec-16 Dec-18



Government Debt

January-November 2019 Central Government revenues reached DOP599bln, increasing 9.1% y/y, well below the 13.1%

y/y gain posted during the same period a year earlier. Looking at the breakdown of revenues for the January-November

2019 period, tax revenue amounted to DOP551.8bln (up 9.5% y/y). Of this, DOP175.8bln (+13.2% y/y) came from income

taxes, while taxes on property increased 14.3% y/y to DOP8.5bln and taxes on goods and services reached DOP330.7bln

(up 8.4% y/y). On the other hand, January-November 2019 total expenses came in at DOP675.9bln or up 12.2% y/y, from

5.1% y/y posted in the same period a year earlier. Current expenditures rose 10.9% y/y to DOP617.6bln driven by the

10.8% y/y, 10.7% y/y and 26.3% y/y increases in salaries, interest, and subsidies, respectively, while capital expenditures

increased 28% y/y to DOP58.3bln. With these numbers, the 12-month Central Government nominal deficit reached

DOP102.5bln or 2.3% of GDP while the primary surplus came in at DOP18.4bln or 0.4% of GDP.

These numbers confirmed our earlier expectations of a nominal fiscal deficit of approximately 2.4% of GDP, well above

the 1.7% budgeted by the government at the start of 2019. On this, we would highlight that in November the government

recognized a fiscal gap of DOP25bln (or 0.6% of GDP), coming from a DOP15bln drop in revenues and expenditures

amounting to DOP10bln higher than estimated in the approved 2019 budget.

Presidential Election Race

Recent polls point to PRM’s Luis Abidaner (42%-43%) leading the presidential race with a significant 11 to 15 point

advantage over PLD and President Danilo Medina’s candidate Gonzalo Castillo (28%-31%), while former president

Leonel Fernandez (16%-19%) obtained a distant third place. As of now, all seems to indicate that the country will head for

a runoff election between Abidaner and Castillo in June 2020, adding to concerns of further fiscal slippage and the

underperformance of the DOMREP curve. We recommend reducing exposure to the belly of the curve as local political

turmoil increases. The DOMREP curve has already lagged the impressive performance of similar credits in the region,

reflecting fiscal concerns amid the election cycle and the poor performance of the tourism sector, despite the improvement

in the growth picture during the second half of 2019. We expect this situation to continue during the first half of 2020.

Outlook

Growth came in at 5.1% in 2019, down from our initial 5.5% estimate but in line with our downward bias expectations as

the tourism sector failed to recover in Q4 2019. For 2020, we do not see space for improvement as tourism fails to pick

up, while global growth prospects for 2020 are corrected downwards. In this line, we maintain our expectations of a

current account deficit increasing above 1.5% but still at low levels compared to recent history. We do not expect any

improvement with respect to the 2.3% fiscal deficit expected for 2019, as the fiscal slippage concerns increase with the

PLD candidate behind in the polls and the lack of new income sources in the short term.



Source: Bloomberg Source: BCRD, CIBC Capital Markets

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19

33%

34%

35%

36%

37%

38%

39%

-4.0%

-3.5%

-3.0%

-2.5%

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-1.5%

-1.0%

-0.5%

0.0%

2014 2015 2016 2017 2018 2019

NFPS Nominal deficit (% of GDP, L)

Total Debt (% of GDP,R)



El Salvador Luis Hurtado CIBC Capital Markets

Production, Prices and Employment Q3 2019 GDP growth came in at 2.7% y/y, accelerating from the 1.9% y/y posted a quarter earlier and the 2.3% y/y in Q1 2019. With these numbers 12-month GDP growth came in at 2.3%, right at the Banco Central of El Salvador’s forecast for 2019. Moreover, economic activity data in H2 2019 shows that this improvement was led by the construction, electricity, financial, and real estate sectors.

Looking at Q3 2019’s results by expenditure, private consumption and fixed capital formation increased 2.4% y/y

(5.0% in Q3 2018) and 1.0% y/y (11.9% in Q3 2018), while public consumption dropped 0.2% y/y (+1.3% in Q3

2018). On the external side of the equation, exports jumped 5.2% y/y (-0.4% in Q3 2018), while imports increased

0.9% y/y (+8.8% in Q3 2018).

By sector, construction (up 12.5% y/y), utilities (up 11.8% y/y), and mining and quarrying (up 6.7% y/y) increased

the most in Q3. Professional and scientific activities (down 5.6% y/y), entertainment (down 3.7% y/y), and public

administrations (down 0.1% y/y) were the only sectors posting declines.

More recent data show that the rebound in growth continued in Q4 with economic activity increasing 2.6% y/y in both

October and November. Construction impetus remained strong in both months, growing 9.9% y/y in October and 12.6%

y/y in November. Official numbers showed a 29% drop in homicides in 2019, boding well for the government’s promise to

increase investment through reductions in the crime rate. On the other hand, remittances continued to show a significant

deceleration with 2019 inflows increasing 4.8% y/y, well below the 8.1% posted in 2018. Exports increased a mere 0.7%

in 2019, down from 2.5% in 2018.

2019 remittances totalled US$5.6bln, up US$259mln with respect to 2018. The United States was the principal

source of remittances, accounting for 94.9% of the total. As we’ve said in previous publications, El Salvador’s

reliance on US growth remains one of the largest sources of risk to its economy, as total remittances as a

percentage of GDP came in at 21% in 2018. The extension of the Temporary Protection Status program in the US

should provide support for remittances growth in line with US nominal GDP growth for the next two years.

2019 exports came in at US$5.9bln, increasing 0.7% driven by the 0.8% and 2.4% respective y/y increases in

manufacturing (excluding Maquiladoras) and agricultural products. On the other hand, imports increased 1.6% y/y

to US$12.0bln, dropping from the 11.9% increase posted in 2018.

April inflation landed at 0% y/y (0.1% m/m), up from the -0.6% y/y and -0.9% y/y posted in November and October,

respectively. Inflation has remained below 1% for the thirteenth consecutive month.




Real GDP Growth 2.6% 2.3% 2.6% 2.3% 2.3%

Inflation (End of Period) -0.9% 2.0% 0.4% 0.0% 0.5%

Prim. NFPS Fiscal Balance (% GDP) -0.2% 0.7% 0.9% 0.6% 0.6%

Nom. NFPS(% GDP) -3.1% -2.5% --2.7% -3.1% -3.0%

Current Account (% of GDP) -2.0% -1.8% -4.8% -3.2% -3.0%

Public Sector Debt/GDP 67.5% 69.4% 69.4% 70.3% 70.0%

Source: IMF, Bloomberg, Portal de Transparencia Fiscal, and CIBC Capital Markets Source: Bloomberg

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%




Government Debt

The numbers released by the Central Bank of El Salvador indicate that Non-Financial Public Sector (NFPS) revenue

(including donations) reached US$6.1bln in 2019, increasing 1.5%, in line with the 1.7% jump in tax revenue. On the other

hand, NFPS expenses increased 3.6% to US$6.6bln. The increase in expenses responded to the 4.4% y/y increase in

current expenses driven by higher interest (up 5.7% y/y) and consumption expenses (4.6% y/y), while capital expenditure

dropped 0.9% to US$859.1mln. The 12-month NFPS nominal deficit (including donations and pensions) came in at

US$825mln (-3.1% of GDP vs 2.7% in 2018), while the 12-month primary surplus came in at US$165.8mln (0.6% of GDP

vs 0.9% in 2018).

Public sector debt increased 4.4% in 2019 to US$19.8bln. As a percentage of GDP, public sector debt reached 50.4%,

0.1 percentage points higher than a year earlier.

Confrontation Between Executive and Legislative Branches Point to the Return of Volatility

In contrast to recent years, the close to 90% approval ratings sustained by Bukele has prevented congress from engaging

in gridlock as traditional political parties look for ways to secure and improve their positions before the 2020 legislative and

local elections. This was shown in the early approval of the 2020 Budget. Nevertheless, President Bukele’s latest

aggressive push to get congress to approve a US$109mln security loan is already serving to reverse ElSALV's supportive

stance.

From a political point of view, it is uncertain how this will play for President Bukele. On one hand, we could see a stronger

stance by congress, defying the display of power shown by Bukele, the return of gridlock in congress, and a faltering in

market optimism. On the other, Bukele’s approval ratings could receive a boost given the general population’s rejection of

traditional political parties and the positive outcome from Bukele’s strategy against crime. Note, security improvements led

to a 29% reduction in homicides during 2019. If the latter outcome were to happen, not only would Bukele have the upper

hand ahead of the legislative elections in 2021 but he could limit the opposition’s power in congress for the rest of 2020 as

they look to enhance their deteriorated position ahead of the elections.

With further fiscal slippage in other regional economies and the presidential election cycle in the Dominican Republic, a quick resolution in favour of Bukele would likely be the best outcome for ELSALV as the search for yield in the market continues and the risks of further confrontation between the legislative and executive powers diminish

Outlook

We expect 2019 growth to land at 2.3%, in line with the recent economic activity indicators and the Central Bank’s

forecast. Nevertheless, we do not foresee an acceleration in 2020 as consumption should start feeling the first effects of

the deceleration of remittances, despite the benevolent investment environment. On the fiscal front, we expect the

nominal fiscal deficits to remain at around 3.0% of GDP as the electoral cycle heats up in late 2020.



Source: Bloomberg Source: IMF, CIBC Capital Markets, Banco Central de El Salvador

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

Dec-12 Apr-14 Sep-15 Feb-17 Jul-18 Dec-19

60

62

64

66

68

70

72

-4.5

-4.0

-3.5

-3.0

-2.5

-2.0

2014 2015 2016 2017 2018 2019

Nominal Deficit (% GDP, L)

NFPS Debt (%GDP, R)



Grenada Tiffany Grosvenor-Drakes CIBC FirstCaribbean

Production, Prices, and Employment Latest tourism data from the Eastern Caribbean Central Bank (ECCB) suggest Grenada’s real GDP growth continued to advance during H1 2019, but was partially tempered by the mixed performance of most other economic sectors.

Tourism value-added likely expanded, as total visitor arrivals and visitor spending rose 3.0% y/y during January to

June 2019. Stay-over arrivals from the US, the UK, Canada, the Caribbean and all other markets advanced 0.3%

y/y, 5.8% y/y, 23.1% y/y, 4.4% y/y and 0.2% y/y, respectively, lifting the total number of stay-over tourists 3.8%

y/y. Further, cruise-ship and yacht passenger arrivals increased 0.4% y/y and 3.7% y/y, respectively, while the

number of excursionists also rose (up 27.0% y/y).

Indicators of construction and investment activity suggest a subdued outturn during the period. Imports of inedible

crude materials except fuels declined 33.9% y/y, while machinery and transport equipment imports slipped 0.8%

y/y. Specifically, the volume and value of imports of construction materials fell 7.4% y/y and 14.2% y/y,

respectively, while the government’s spending on capital works also declined (down 21.8% y/y). The completion

of the Silversands Grenada Resort and the Gouyave extreme rainfall project likely contributed to the lower level of

construction activity during the period.

Weak performances in the majority of sub-categories of industrial production indicate slippage in manufacturing

output, while pests and weather-related disruptions contributed to reduced agricultural production during H1 2019.

Consumer prices edged upward (0.4% y/y) at September 2019, reflecting increased prices of food and non-alcoholic beverages (up 0.3% y/y), transport (up 0.9% y/y) and communication (up 0.5% y/y).


Deposit growth outpacing loan growth continued to increase excess liquidity over the 12 months to September 2019, while

banks’ financial stability indicators improved during the period.

Total retail loans dipped (0.5% y/y). However, a 7.9% y/y expansion in lending to business eclipsed an 18.4% y/y

contraction in lending to the public sector, pushing corporate loan balances 4.5% higher y/y and leading to 1.4%

y/y expansion in total loans.

Despite a 2.3% y/y contraction in non-resident deposits, total deposit balances grew 5.8% y/y as both retail (up

2.2% y/y) and corporate deposits (up 13.6% y/y) increased during the period

The loan-to-deposit ratio declined 2.3 percentage points y/y to 53.1% at September 2019. Accordingly, the

average spread fell, as the weighted average lending rate slipped from 7.60% to 7.25% over the year to

September 2019, while the weighted average deposit rate fell 7bps to 1.23% over the same period.




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All Items Food Fuel and Light



Banks’ non-performing loan ratio improved from 2.6% in September 2018 to 2.1% at September 2019, while the

capital adequacy ratio improved 0.7 percentage points y/y to 13.8% at the end of the same period. Further, the

annualised return on assets rose from 1.18% at September 2018 to 1.25% at September 2019.

Government Debt

Greater revenue coupled with reduced expenditure increased the government’s fiscal surplus by US$7.7mln to

US$32.9mln during the first six months of 2019.

A US$5.5mln (4.25% y/y) expansion in tax revenue was largely responsible for a 3.4% y/y increase in current

revenue during H1 2019. Taxes on income and profits (up US$1.4mln), property (up US$0.3mln), domestic goods

and services (up US$2.0mln) and international trade and transactions (up US$1.9mln) all recorded increased

collections. However, even with a US$0.7mln increase in CBI inflows, non-tax receipts dipped US$0.8mln (11.2%

y/y). Grant funding rose US$0.4mln (3.6% y/y) during the period.

Total expenditure fell US$2.6mln (2.0% y/y), reflecting declines in both capital and current spending. Reduced

spending on personal emoluments (up US$2.6mln), goods and services (down US$0.5mln) and interest

payments (down $0.4mln) eclipsed higher outlays on transfers and subsidies (up US$3.5mln). Capital expenditure

slipped US$2.4mln (21.8% y/y).

Against the background of Grenada’s Fiscal Responsibility Act, total public debt continued on its downward trajectory, falling 3.1% y/y to US$738.7mln or 63.2% of GDP in June 2019.

Outlook

Latest ECCB forecasts indicate a real GDP expansion of 3.0% in 2019, largely propelled by improved tourism output and

knock-on effects on wholesale and retail trade, transport, storage and communication, and real estate renting and other

business activities. However, the lacklustre performance of the construction, agriculture and manufacturing sectors could

likely temper the effect of the tourism expansion. The ECCB expects the government’s fiscal position to continue to

strengthen as targets under the FRA continue to be met.




650

700

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900

2015Q2 2016Q2 2017Q2 2018Q2 2019Q2

(US$mln)

-8

-6

-4

-2

0

2

4

6

8

2014Q3 2015Q3 2016Q3 2017Q3 2018Q3 2019Q3

Loans

Deposits



Guyana Tiffany Grosvenor-Drakes CIBC FirstCaribbean


The Bank of Guyana reports that real economic output advanced 4.0% during H1 2019 pillared by expansions in the

construction, manufacturing and services sectors.

Agricultural activity slipped 0.3% y/y as reduced production of sugar (down 2.7% y/y), fishing (down 12.2% y/y),

and livestock (down 8.1% y/y) overshadowed increased output of rice (up 3.7% y/y), forestry (up 8.8% y/y) and

other crop sub-sectors (up 4.8% y/y). Meanwhile, a 4.4% y/y expansion in gold production eclipsed fall-offs in

bauxite (down 1.1% y/y) and other mining activity, and increased mining and quarrying output by 2.6% y/y.

Industrial unrest at the Bauxite Company of Guyana Inc. negatively affected the performance of bauxite.

Greater private investment in real estate and enhanced execution of public projects led to an 8.2% y/y expansion

in construction output. Further, growth in the manufacturing sector accelerated to 3.6% y/y due to increased

production of milled rice and other manufacturing. Specifically, output of ice cream, non-alcoholic beverages and

detergents rose 24.7% y/y, 15.1% y/y and 11.3% y/y, respectively.

The services sector benefited from activities relating to the emerging oil and gas sector. Output of services

expanded 4.6% y/y, reflecting an improved outturn of wholesale and retail trade (up 5.9% y/y), real estate activity

(up 5.9% y/y), transport and storage output (up 5.5% y/y), and finance and insurance activities (up 4.1% y/y).

The developing petroleum sector influenced the balance of payments outturn. Increased foreign direct investment

generated a US$317.6mln larger capital account surplus, which more than offset the increased current account deficit (up

US$288.4mln) largely due to related import payments. Consequently, the overall balance of payments deficit fell to

US$86.9mln from US$139.8mln one year earlier.

Consumer prices rose 1.6% y/y at June 2019 primarily driven by a 4.4% y/y increase in food prices. However, the price of

housing fell by 0.4% y/y.

Developments in Financial Markets Greater excess liquidity and lower interest rates characterised the four quarters ended June 2019. Loan quality improved but capital adequacy slipped over the same period.

Higher deposits of the private sector (up 9.3% y/y) and non-bank financial institutions (up 4.8% y/y) more than

offset a 14.6% y/y reduction in public sector deposits, pushing total deposits of residents 5.2% higher. The

balances of both businesses (up 16.2% y/y) and consumers (up 7.3% y/y) increased during the period.

Chart 1 Key Economic Indicators (y/y; %)

Chart 2 Key Commodity Prices (US$)

Source: Bank of Guyana and CIBC FirstCaribbean. Source: Bank of Guyana, International Monetary Fund, Central Bank of Trinidad and Tobago and CIBC FirstCaribbean.

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2014Q2 2015Q2 2016Q2 2017Q2 2018Q2 2019Q2

Rice Production (L)

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Gold Production (R)

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Crude Oil price/ barrel (Brent; L)

Gold price/ Troy Ounce (R)



Private sector lending rose 6.0% y/y as business, consumer and real estate mortgage loans advanced 4.0% y/y,

12.9% y/y and 5.7% y/y, respectively. The private sector expansion was largely responsible for a 5.9% y/y

expansion in total loans to residents, but the loans to non-bank financial institutions also rose during the period

(up US$38.4mln), while lending to the public sector fell 28.3% y/y.

Excess liquid assets increased 3.2% y/y, while commercial banks’ weighted average lending rate and small

savings rate fell 16bps y/y and 10bps y/y to 9.97% and 1.00%, respectively, at June 2019. Further, banks’ return

on assets slipped from 1.16% during H1 2018 to 1.08% during H1 2019. Banks’ non-performing loan ratio

improved marginally y/y to 12.58% at June 2019, while the capital adequacy ratio fell by 1.1 percentage points y/y

to 27.0% at June 2019.

The Bank of Guyana’s net international reserves rose 10.2% y/y to US$522.1mln (1.6 months of import cover) at the end of June 2019. Since then, the reserves increased to US$528.3mln at September 2019, 16.7% above September 2018.

Government Debt Greater spending overshadowed improved revenue collection and narrowed the central government’s fiscal surplus by US$3.5mln to US$11.7mln during H1 2019.

Tax revenue rose US$39.8mln (8.2% y/y), but non-tax revenue fell US$8.0mln (19.4% y/y), partially attributed to

reductions in transfers from the Bank of Guyana’s surplus, moderating the expansion in current revenue to 6.1%

y/y. Specifically, income tax, taxes on production and consumption, and taxes on international trade increased

US$29.8mln (15.0% y/y), US$7.1mln (3.5% y/y) and US$4.2mln (8.9% y/y), respectively, but other tax revenue

declined US$1.4mln (4.1% y/y). Capital receipts also advanced (up US$12.9mln or 47.1% y/y).

Total spending increased US$48.2mln (9.0% y/y), reflecting greater current and capital outlays. Higher payments

for personal emoluments (up US$18.8mln or 14.2% y/y) and goods and services (up US$17.6mln or 18.5% y/y)

overshadowed reductions in transfer payments (down US$14.3mln or 7.3% y/y) and debt charges (down

US$0.5mln or 2.5% y/y), increasing current expenditure (up US$21.5mln or 4.8% y/y). Similarly, capital spending

rose US$26.7mln y/y to US$91mln during H1 2019.

The total stock of public debt rose 1.5% y/y to US$1.66bln at June 2019 (42.9% of 2018 GDP), as domestic debt and external debt increased 0.4% y/y and 1.8% y/y to US$382.1mln and US$1.25bln, respectively.

Outlook

Activities related to the emerging oil and gas sector are expected to continue to boost economic output, with the Bank of

Guyana’s latest projections suggesting real GDP growth of 4.5% for 2019. Guyana’s post-2019 outlook continues to be

very promising as oil production commenced ahead of schedule in December 2019. The IMF expects the surge in real

economic activity, exports and government revenue to steadily reduce Guyana’s external current account deficit and

public debt levels. However, while commending the passage of legislation for the National Responsibility Fund, the IMF

also recommends a fiscal responsibility framework to guarantee the sound management of Guyana’s oil wealth.



Source: Bank of Guyana and CIBC FirstCaribbean. Source: Bank of Guyana and CIBC FirstCaribbean.

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Jamaica Tiffany Grosvenor-Drakes CIBC FirstCaribbean

Production, Prices, and Employment Greater tourism, mining and construction activity sustained real economic growth in Jamaica at 1.5% y/y during H1 2019.

Mining and quarrying output growth slowed to 7.8% y/y during H1 2019 from 11.1% y/y during Q1 2019 as

alumina production continued to advance but bauxite production declined during Q2, reflecting reduced demand.

An increase in housing starts by the National Housing Trust supported a 1.1% y/y rise in construction activity,

while greater production of refined petroleum products contributed to a 0.9% y/y uptick in manufacturing output.

However, despite increased poultry meat and egg production, output of agriculture forestry and fishing dipped

0.7% y/y, reflecting declines in the production of bananas, plantains, coffee, and milled sugar cane, partially

attributed to dry weather conditions.

Value-added in the services sector grew 1.8% y/y. Increased domestic cargo movement at the ports coupled with

a greater number of air passenger arrivals into Jamaica led to a 1.0% y/y expansion of the transport, storage and

communication sector. Tourism output advanced 6.6% y/y as stay-over arrivals rose 10.9% y/y. However, the

average length-of-stay slipped 2.5% y/y, while cruise passenger arrivals declined 12.4% y/y. Electricity and water

production also grew (0.9% y/y) during the half-year.

Since then, stay-over arrivals rose 8.5% y/y during January to November 2019. Arrivals from the US, Latin

America, the Caribbean and Asia increased 13.0% y/y, 9.6% y/y, 5.2% y/y and 8.6% y/y, respectively, but arrivals

from Canada, Europe and other markets fell 4.9% y/y, 1.8% y/y and 1.4% y/y, respectively. Meanwhile, cruise-

arrivals continued to slump, declining 16.9% y/y, against the backdrop of 14.6% fewer calls during the period.

The unemployment rate fell from 8.7% in November 2018 to 7.2% in November 2019, largely reflecting a 2.6 percentage

points improvement in the female category. The number of employed persons rose 2.4% y/y, while the size of the labour

force increased 0.4% y/y. Increased employment was recorded in construction (up 1.6% y/y), hotels and restaurants (up

5.5% y/y), real estate, renting and business activities (up 5.3% y/y) and public administration and defence (up 17.9% y/y),

but employment in agriculture, hunting, forestry and fishing, and manufacturing declined 3.3% y/y and 0.8% y/y,

respectively.

Consumer prices increased by 4.6% y/y in November 2019. The price of food and non-alcoholic beverages rose 10.7%

y/y, but the prices of transport and housing, water, gas, electricity and other fuels fell 0.7% y/y and 1.3% y/y, respectively.

Developments in Financial Markets Against the backdrop of successive reductions in the Bank of Jamaica’s (BOJ) policy rate, lending rates have continued to decline. Further, both commercial bank loans and deposits expanded over the 12 twelve months to November 2019.

Greater personal lending to residents (up 11.3% y/y) and non-residents (up 9.6% y/y), along with a 10.0% y/y

expansion in corporate loans, increased total commercial banks’ loans and advances by 10.6% y/y.

Total deposit balances grew 2.1% y/y over the same period. Demand and savings deposits rose 10.6% y/y and

5.0% y/y, but time deposits fell 12.8% y/y.

The BOJ reduced its policy rate by 25 bps in August 2019, but maintained it at 0.5% in September and November

2019. The weighted average lending and deposit rates fell 113bps y/y and 21bps y/y to 12.9% and 1.1%,

respectively, at September 2019. The Government’s Treasury Bill rate also fell 24bps y/y to 1.55% at October

2019.

Net international reserves held by the BOJ rose 7.1% y/y to US$3.11bln or 22.6 weeks of imports of goods and services at the end of November 2019. The JMD/US$ continued to swing both directions, but depreciated 6.3% y/y over the same period.

Commercial banks’ non-performing loans to total loans ratio improved 0.2 percentage points y/y to 2.3% at September

2019, while the capital adequacy ratio rose from 14.4% to 14.9% during the same period.



Government Debt Government’s fiscal surplus improved US$77.5mln to US$85.6mln over the first eight months of FY2019/20 ended November 2019 as greater revenue collections outpaced increased spending.

Total revenue and grants improved US$87.5mln. Tax and non-tax receipts rose US$70.6mln (2.7% y/y) and

US$53.3mln (22.1% y/y), but capital revenue and grants declined US$12.4mln (66.3% y/y) and US$23.9mln

(48.9% y/y).

A US$72.3mln (2.8% y/y) expansion in recurrent spending overshadowed a US$63.6mln (20.6% y/y) fall-off in

capital outlays and lifted total expenditure 0.3% higher y/y to US$2.92bln. Spending on programmes, wages and

salaries and external interest payments rose US$39.6mln (4.1% y/y), US$44.6mln (4.5% y/y) and US$2.1mln

(0.5% y/y), but domestic interest payments fell US$12.7mln (5.6% y/y).

Latest data from the Debt Management Unit of the Ministry of Finance and the Public Service indicate that total public sector debt fell 3.8% y/y to US$14.54bln at October 2019. Total central government domestic debt fell 8.4% y/y to US$5.30bln, while external debt declined 5.7% y/y to US$8.77mln, reducing total central government debt 6.7% y/y. However, the net debt of public bodies increased from US$68.7mln to US$469.9mln, reflecting a reduction in the level of cross holdings over the same period. On September 27, 2019, Standard and Poor’s upgraded Jamaica’s long-term foreign and local currency rating from ‘B’ to ‘B+’, citing the sustained progress in attaining macroeconomic stability. Additionally, on December 11, 2019, Moody’s upgraded Jamaica’s long-term issuer and senior unsecured rating from B3 to B2, alluding to the strong commitment to fiscal consolidation and structural reform. Further, on November 4, 2019, the IMF announced successful completion of the sixth and final review under Jamaica’s Stand-By Arrangement, which expired on November 10, 2019. The Fund stated that Jamaica’s commitment to reforms over the last six and a half years has led to entrenched fiscal discipline and a significant reduction in public debt.

Outlook

The Government’s expressed commitment to maintaining policy discipline following the now-concluded IMF programme

bodes well for continued macroeconomic stability. Further, the IMF notes that the Government is on track to meet the

FY2019/20 budget estimates. However, following a 2% expansion during FY2018/19, the IMF projects that real GDP

growth will likely slow to 0.8% during FY2019/20 because of persistent drought conditions and the 18- to 24-month

shutdown of the Alpart mining company to facilitate upgrades. Nonetheless, with unemployment at an all-time low, the

IMF expects medium-term growth to recover, but emphasized the need to address structural challenges to unlock greater

growth potential.



Source: Planning Institute of Jamaica, Bank of Jamaica, Caribbean Tourism Organization, Jamaica Tourist Board and CIBC FirstCaribbean.

Source: Bank of Jamaica and CIBC FirstCaribbean.

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Chart 3 Foreign Direct Investment and Remittances


Source: Bank of Jamaica and CIBC FirstCaribbean. Source: Bank of Jamaica and CIBC FirstCaribbean.

Chart 5 US$JMD Exchange Rate

Chart 6 Developments in Capital Market Indicators

Source: Bank of Jamaica and CIBC FirstCaribbean. Source: Bank of Jamaica and CIBC FirstCaribbean.

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Panama Luis Hurtado CIBC Capital Markets

Production, Prices, and Employment Q3 2019 GDP came in at 2.7% y/y, decelerating from the 2.9% y/y and 3.1% y/y increases posted in Q2 and Q1 2019,

respectively. With these numbers, the Panamanian economy grew 3.2% over the 12-month period ending in September.

We do not expect to see much improvement from this level, despite Minera Panama ramping up production, as the

government implements fiscal measures to control spending and reduce the larger fiscal deficit.

Mining and quarrying (up 83.1% y/y) increased the most in Q3 2019, accelerating from the 6.6% and 8.3% posted

in Q2 2019 and Q1 2019, respectively. Agriculture and forestry, transport, storage and communication, and

utilities also presented solid increases, coming in at 10.1% y/y, 9.1% y/y, and 5.7% y/y, respectively. It is worth

noting that mining activity accounted for roughly 50% of Q3 2019 growth.

On the other hand, fishing (down 11.3% y/y), hotels and restaurants (down 3.6% y/y), real estate, renting and

business activities (down 2.8% y/y), and construction (down 2.6% y/y) all posted declines during the third quarter.

More recent growth indicators signal a slight acceleration of growth in the last quarter of 2019. Economic activity came in

at 3.4% y/y and 3.6% y/y in October and November, respectively. With these numbers, growth in the January 2019-

November 2019 period came in at 3.3% y/y. Despite the deceleration of growth and trade concerns, the Panama Canal

continued to show a positive performance in 2019, with toll revenues increasing 6.1% y/y, albeit down from the 7.8% gain

posted in 2018. We expect economic activity to continue its acceleration in H1 2020, in line with the increase in mining

production and copper exports as Minera Panama ramps up operations. Nevertheless, as the government implements

fiscal adjustment measures we expect the 2020 growth expectation to be contained in the 4%-4.5% range.

Q1-Q3 2019 current account deficit came in at US$3.4bln, down 19.5% from the same period in 2018. With this number,

the 12-month current account deficit landed at 7.1% of GDP, down 1.4 p.p. from the 8.5% deficit posted at the end of Q3

2018. Looking at the trade balance for the first three quarters of 2019, exports reached US$802mln, jumping 51.2% y/y

amid the 19.7% y/y increase in agricultural exports and the 62.3% gain in non-agricultural exports as Minera Panama’s

shipments added to copper exports. Foreign direct investments reached US$4.7bln (9.3% of GDP, 12m) during the same

period or up 15.9% y/y.

December inflation came in at -0.2% m/m or -0.1% y/y, remaining below 1% for the fourteenth consecutive month. By

sector, alcoholic, beverages and tobacco (up 1.5% y/y), hotels and restaurants (up 1.3% y/y), and transportation (up

0.8%) increased the most in 2019. However, furniture and house equipment (down 1.3% y/y), communications (down

1.2% y/y), and recreation and culture (0.8% y/y) presented the steepest declines in prices during the same period.




Real GDP Growth 5.0% 5.4% 3.7% 3.2% 4.3%

Inflation (End of Period) 1.5% 0.5% 0.2% -0.1% 1.0

Adjusted NFPS Fiscal Balance (% GDP) -1.0% -1.0% -1.1% -1.3% -1.0%

Nom. NFPS Fiscal Balance (% GDP) -2.5% -1.7% -2.9% -3.1% -2.75%

NFPS Debt/GDP 39.5% 39.9% 39.5% 45.7% 47%

Source: Ministerio de Hacienda, IMF and CIBC Capital Markets Source: Bloomberg

2.0%

2.5%

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3.5%

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Government Debt

Central government revenue for the 2019 period came in at US$8.4bln (down 6.5% y/y). Tax revenue reached US$5.5bln

(down 7.1% y/y), while non-tax income dropped 5.2% y/y to US$2.9bln. On the expenditure front, total expenses came in

at US$10.9bln, declining 1.4% y/y. Current expenditures increased 1.9% y/y to US$7.4bln as personnel services

increased 2.9% y/y to US$3.2bln and transfers increased 0.4% y/y to US$2.1bln. On the other hand, capital expenses

dropped 7.7% y/y to US$3.5bln. Central government nominal deficit for 2019 came in at 3.75% of GDP, down from 3.2%

of GDP.

With these numbers, Non-Financial Public Sector (NFPS) revenues in 2019 landed at US$12.3bln, down 3.7% y/y. Total

expenses dropped 1.6% y/y to US$14.4bln. Hence, the NFPS nominal deficit in 2019 came in at 3.1% of GDP, up from

2.9% during the same period in 2018, while the primary deficit reached US$1.4bln or 2.0% of GDP.

The new Fiscal Responsibility Law (FRL) stipulates a 3.5% nominal deficit for 2019. Nevertheless, despite the deficit

beating the revised 2019 deficit target, Fitch changed Panama’s BBB credit outlook to Negative from Stable as it reflects a

marked deterioration in fiscal deficits and a significant increase of the government debt burden. This follows the upward

revision to deficit targets by the new administration and the greater-than-anticipated growth deceleration.

Updated Deficit Numbers, New FRL, and 2020 Budget Should Limit Growth This Year

As we’ve mentioned in previous publications, concerns that the government incurred substantial arrears were reflected by

the new administration in H2 2019. Finance Minister Hector Alexander stated that without any adjustment the deficit would

have landed at 4.5% of GDP in 2019, far above the 2.0% target in the FRL. Hence, as we expected, congress approved

the revision of the FRL on Monday, October 28. The revision included changing the nominal fiscal deficit target for 2019 to

3.5% and to 2.75%, 2.5% and 2.0% for 2020, 2021, and 2022, respectively. Another point to highlight from the fiscal

deficit report this year is that the Ministry of Finance started paying the arrears accumulated in previous years; however, it

decided to leave them out of the 2019 numbers by revising the deficits from the last four years.

The current administration’s goal to implement a considerable fiscal adjustment remains a difficult task for the years to

come as growth prospects remain below potential output. Only in 2019, forecasts were revised steeply downward from

4%-4.5% at the start of the year, to end in the 3.1%-3.3% range despite the start of Minera Panama’s operations in H2

2019. Moreover, the 2020 Budget points to further restrictions on expenditures, with capital expenses dropping another

6.7%. 2020 growth forecasts by private and public entities range from 3.0%-5.5%, with the government’s estimates at the

high end of the range at 5.2%. The market has remained optimistic on PANAMA with substantial demand on debt

issuance despite fiscal concerns; however, we expect the curve to lose steam as growth fails to pick up substantially and

fiscal concerns increase.



Source: Bloomberg Source: IMF, CIBC World Markets

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2008 2010 2012 2014 2016 2018F

Nominal Govt. Bal. (%GDP, L)

Govt. Debt (% GDP, R)



St. Kitts and Nevis Tiffany Grosvenor-Drakes CIBC FirstCaribbean


Greater stay-over tourism and construction activity suggest an improvement in economic output during H1 2019; however,

preliminary indicators imply a mixed performance for most other sectors.

Greater arrivals from all major markets increased the number of stay-over visitors by 11.9% y/y. Arrivals from the

US, the UK, Canada, the Caribbean and all other markets rose 6.7% y/y, 3.3% y/y, 79.7% y/y, 6.2% y/y and

24.7% y/y, respectively. Yacht passenger arrivals also grew (up 52.0% y/y), but declines in the number of cruise

arrivals and excursionists (down 1.0% y/y and 30.9% y/y, respectively) moderated the expansion in total visitor

arrivals to 0.2% y/y. Nevertheless, visitor spending increased 23.5% y/y.

Construction output likely sustained its growth momentum supported by both public and private projects.

Government spending on capital works, in particular, rose 46.5% y/y to US$27.8mln, reflecting road

improvements and infrastructural upgrades on both St. Kitts and Nevis. Manufactured goods exports rose 26.7%

y/y, suggesting a likely uptick in manufacturing value-added, while agricultural production is also estimated to

have increased as a 59.0% recovery in crop production likely outweighed a fall-off in livestock and chicken output

during the period.

An overall US$3.8mln (13.7% y/y) expansion in exports combined with a US$7.6mln (4.5% y/y) contraction in total imports

reduced the merchandise trade deficit by 8.1% y/y to US$129.8mln during the six-month period.

Consumer prices declined 0.2% y/y during September 2019 as the price of food and non-alcoholic beverages increased

1.7% y/y, but the price of transport declined 2.0% y/y.


Faster loan growth relative to deposit growth reduced excess liquidity over the four quarters ended September 2019. Loan

quality and profitability worsened, but banks’ capital levels remained adequate.

Greater lending to the public sector (up 14.9% y/y) and a 0.6% y/y uptick in lending to businesses lifted total

corporate loans 4.9% y/y. When combined with a more modest 1.2% y/y expansion in retail lending, the balance

of total loans outstanding rose 3.2% y/y.

Total deposits advanced 1.2% y/y as retail and corporate balances increased 2.8% y/y and 0.8% y/y, respectively,

but non-residents deposits slid 1.3% y/y.

Consequently, the loan-to-deposit ratio rose marginally y/y to 41.2% at the end of September 2019. Further, the

weighted average lending and deposit rates fell 14bps y/y and 6 bps y/y to 7.96% and 1.63%, respectively.




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Following a 5 percentage points spike to 24.9% in September 2018, the non-performing loans to total loans ratio

improved only marginally to 24.7% at September 2019, while banks’ annualised return on assets fell from 1.20%

to 0.73% during the same period. However, the capital adequacy ratio rose marginally to 20.6% at September

2019.

Government Debt The Government of St. Kitts and Nevis increased both its current and capital spending, but significant growth in Citizenship by Investment (CBI) inflows boosted revenue and led to a US$29.7mln improvement in the fiscal surplus to US$68.9mln during the first six months of 2019.

Total current revenue increased US$44.6mln (26.2% y/y). A US$58.1mln (75.3% y/y) surge in CBI receipts

pushed non-tax revenue US$41.1mln (54.2% y/y) higher, while tax revenue increased more modestly (up 3.7%

y/y) during the six-month period. Taxes on income and profits, property, and domestic goods and services rose

US$3.0mln, US$0.1mln, and US$0.6mln, respectively, but taxes on international trade and transactions slipped

US$0.2mln. Capital revenue and grants also fell by US$0.6mln (31.2% y/y) and US$1.5mln (17.1% y/y),

respectively, during the period.

Government increased its current spending on personal emoluments (up US$2.0mln) and transfers and subsidies

(up US$4.7mln), but reduced outlays on goods and services and interest payments by US$1.0mln and

US$1.3mln, respectively. Further, capital expenditure and net lending advanced US$8.8mln (46.5% y/y).

Central government debt declined 9.2% y/y to US$413.6mln, but public corporations’ debt rose 18.3% y/y to US$167.9mln at June 2019. Consequently, total public debt fell 2.6% y/y to US$581.4mln, or 1.6 percentage points to 59.3% of GDP.

Outlook

The ECCB expects 3.6% real GDP growth in 2019 fuelled by continued improvement in the tourism and construction

sectors. Agricultural output is also expected to support growth, but disease in the livestock sector will likely partially offset

the recovery of crop production following the passage of the 2017 hurricanes. The government’s fiscal surplus is expected

to persist on account of greater CBI receipts, but could be tempered by increased capital outlays to fund public projects.




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St. Lucia Tiffany Grosvenor-Drakes CIBC FirstCaribbean

Production, Prices, and Employment A strong tourism performance supported by improved activity in the construction and manufacturing sectors likely advanced St. Lucia’s real GDP growth during H1 2019.

Greater arrivals from the US (up 6.2% y/y), the UK (up 13.0% y/y), the Caribbean (up 9.3%) and all other markets

(up 2.6% y/y) eclipsed a 3.5% y/y decline from Canada, lifting total stay-over arrivals 6.4% y/y. Further, despite an

8.0% y/y fall-off in the number of cruise-ship calls, cruise passenger arrivals rose 1.0% y/y. However, the number

of yacht passengers and excursionists slipped 7.1% y/y and 19.2% y/y, respectively. Nonetheless, total visitor

spending advanced 36.4% y/y during H1 2019.

Value-added in the construction sector likely improved as government spending on capital works increased

US$12.2mln (42.1% y/y), complementing privately funded projects, such as the construction of a horse race track

as part of the first phase of the Pearl of the Caribbean, and upgrades to tourism infrastructure. Further,

commercial bank loans for home construction and renovation edged upward (0.5%) during the period.

A 3.1% y/y expansion in domestic exports of beverages and tobacco suggests an uptick in manufacturing output,

but declines in the value of furniture, electrical, plastic and metal products likely tempered this increase. However,

crop damage following the passage of Tropical Storm Kirk in September 2018 contributed to a 37.0% y/y

contraction in banana production, and likely reduced agricultural production during H1 2019. Further, the banana

sector also suffered from reduced demand as UK importers have imposed stricter quality standards.

Total exports declined US$5.9mln (18.6% y/y), but a US$58.1mln contraction in total imports induced a 17.5% y/y reduction in the merchandise trade deficit to US$248.1mln during the period. Consumer prices slipped 0.2% y/y at September 2019 as the prices of food and non-alcoholic beverages and transport increased 2.2% and 4.8%, respectively, but the price of housing, utilities, gas and other fuels dipped 5.6% y/y.


Subdued credit demand coupled with modest deposit growth increased excess liquidity over the four quarters ended

September 2019. Banks’ loan quality and capital adequacy improved over the same period.

Lending balances contracted 0.4% y/y. Public sector loans advanced 13.3% y/y, but lending to business

continued to slide, falling 5.5% y/y, and reduced corporate lending by 3.0% y/y. Retail loans advanced (1.8% y/y).

Despite a 9.9% y/y fall-off in non-resident deposit balances, total deposits grew 0.8% y/y as retail and corporate

deposits increased 1.7% y/y and 2.1% y/y, respectively.




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The loan-to-deposit ratio fell 0.9 percentage points y/y to 78.4% at September 2019, while the weighted average

lending and deposit rates declined 46bps and 1bps to 7.58% and 1.41%, respectively, over the four quarters to

September 2019.

Banks’ non-performing loan ratio improved to 8.6% in September 2019 from 10.3% one year earlier, while the

capital adequacy ratio rose 1.9 percentage points y/y to 21.1%. However, the annualised return on assets slipped

from 1.95% to 1.47% over the same period.

Government Debt

Increased current and capital spending worsened the Government of St. Lucia’s fiscal balance by US$25.7mln to an

US$18.9mln deficit during the first six months of 2019.

Increased taxes on income and profits (up US$1.8mln), domestic goods and services (US$0.4mln), and

international trade and transactions (up US$1.9mln) more than offset a US$0.7mln fall-off in property taxes, lifting

total tax receipts by US$3.4mln (1.7% y/y). However, an US$8.7mln fall-off in Citizenship by Investment (CBI)

inflows induced a US$2.7mln (11.2% y/y) dip in non-tax revenue and moderated the expansion in current revenue

to US$0.7mln (0.3% y/y). Further, total grant receipts declined US$2.7mln (11.2% y/y).

Current expenditure increased US$11.5mln (5.7% y/y) as increased spending on personal emoluments (up

US$11.8mln), interest payments (up US$1.3mln), and transfers and subsidies (up US$1.2mln) overshadowed a

US$2.7mln decline on goods and services. Further, capital outlays rose US$12.2mln (42.1% y/y) during the

period.

Public debt rose 2.8% y/y to US$1.23bln (64.9% of GDP) at the end of June 2019, from 63.2% one year earlier. Total central government debt increased 3.2% y/y to US$1.16bln but public corporation debt fell 3.4% y/y to US$71.4mln.

Outlook

The ECCB projects that St. Lucia’s real GDP growth will strengthen to 2.0% in 2019 following 1.5% in 2018. The robust

tourism outturn during the first half of the year is expected to continue, while the construction momentum will likely be

sustained as both private and public investment projects get under way. However, agricultural output is likely to remain

depressed by year-end. While the Government’s increased capital spending is anticipated to boost economic activity and

employment, the ECCB cautions against the implication for the island’s debt levels, as baseline projections push debt

beyond the debt-to-GDP target of 60% by 2030.




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Sint Maarten Tiffany Grosvenor-Drakes CIBC FirstCaribbean


The Centrale Bank van Curaçao en Sint Maarten (CBCS) reports that real GDP rebounded 8.4% y/y and 6.2% y/y in Q1

and Q2 2019, respectively, led by a strong recovery in tourism services.

Tourism value-added regained momentum, growing by 28.4% y/y in Q1 2019 and 20.3% y/y in Q2 2019, aided by

the reopening of large hotels and improved operational capacity at the Princess Juliana International Airport.

During January to June 2019, stay-over arrivals rose 130.3% y/y, while cruise ship passenger arrivals advanced

35.7% y/y, reflecting a 52.2% y/y expansion in cruise ship calls. Expansions were recorded across all major

markets with stay-over arrivals from the US, Canada, Latin America, Europe and the Caribbean increasing

242.1% y/y, 452.4% y/y, 128.7% y/y, 37.0% y/y, and 19.8% y/y, respectively. The number of tourists from all other

markets also advanced (up 60.4% y/y). Since then, tourism activity continued to recover during January to August

as stay-over arrivals rose 114.5% y/y and cruise arrivals increased 23.3% y/y, in line with 39.9% y/y higher calls.

Further, continued reconstruction work, including repairs to hotel infrastructure as well as new private sector

projects, propelled construction output by 6.6% y/y during Q2 2019. Manufacturing activity also grew (up 2.8%

y/y), largely because of increased ship repair activity following the return of yachts to private marinas.

Greater local and tourism spending boosted output in wholesale and retail trade (up 6.8% y/y) during Q2 2019,

while the production of utilities rose 5.1% y/y, reflecting improved demand for electricity from hotels and other

tourism service providers.

Consumer prices increased 0.61% y/y and 0.09% y/y during Q2 and Q3 2019, respectively.

Developments in Financial Markets Marginal improvements in total loans and deposits over the year ended October 2019 kept excess liquidity on par with the level recorded one year earlier.

Total loans and advances slipped 0.2% y/y as a 4.4% y/y contraction in corporate loans overshadowed a 5.1% y/y

rise in retail lending. Mortgages and consumer loans increased 3.3% y/y and 8.7% y/y, respectively, but a 33.4%

y/y expansion in loans to the public sector was insufficient to offset a 5.2% y/y fall-off in outstanding loans to

businesses.

A 3.6% y/y recovery in corporate deposits eclipsed declines of 3.1% y/y and 4.2% y/y in retail and non-resident

deposits, respectively, registering a 0.3% y/y uptick in total deposits.

Consequently, the loan-to-deposit ratio dipped marginally y/y to 67.1% at October 2019.



Source: Central Bank of Curaçao and St. Maarten and CIBC FirstCaribbean. Source: Central Bank of Curaçao and St. Maarten and CIBC FirstCaribbean.

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The gross official FX reserves of the Monetary Union, excluding gold, rose 1.3% y/y to US$1.26bln (16.8 weeks of imports

of goods and services) at October 2019, but remained below the levels recorded two years ago (about 22 weeks of

imports of goods and services).

The CBCS continued to adjust its monetary policy, citing the overall downward trajectory of FX reserves and continued

excess liquidity in the banking system. Following the reintroduction of biweekly auctions of Certificates of Deposits (CDs)

in August 2019, the CBCS introduced weekly auctions with a two-week term to replace the four-week CDs, effective

January 31 2020. Further, the bank increased its reserve requirement from 18% to 19%, effective the reserve requirement

period February 17 to March 15, 2020.

Government Debt A 21.1% y/y boost in tax receipts improved the government’s budget deficit by US$23.9mln to US$0.6mln.

Revenue collections benefited from the recovery of economic activity during the period. Total revenue rose 20.4%

y/y to US$127.5mln as increased receipts of the turnover tax, wage tax and profit tax boosted tax revenue by

US$18.1mln (21.1% y/y). Income from concessions and fees and licenses also increased, up US$3.2mln (33.5%

y/y) and US$3.1mln (90.3% y/y), respectively, but other revenue fell US$2.9mln (40.9% y/y).

Government reduced its spending 1.8% y/y to US$128.1mln. Expenditure on wages and salaries and subsidies

rose US$0.1mln (0.2% y/y) and US$0.5mln (1.8% y/y), respectively, but spending on goods and services, social

security and other spending declined US$1.3mln (4.5% y/y), US$0.6mln (7.7% y/y) and US$1.1mln (21.1%),

respectively.

Public debt outstanding rose to US$441.3mln (41.6% of GDP) at June 2019, from US$360.3mln (36.0% of GDP) at June 2018.

Outlook

The CBCS projects a 5.3% recovery of real GDP growth in 2019 underpinned by the rebound in tourism activity and

ongoing construction work. Further, the reconstruction of the Princess Juliana Airport and other private projects are

expected to sustain economic growth in 2020 and over the next few years. However, the IMF cautions that given the slow

pace of reforms, fiscal deficits could likely persist. Moreover, the airport reconstruction loan from the European Investment

Bank is expected to further increase the government’s debt burden.


Source: Central Bank of Curaçao and St. Maarten and CIBC FirstCaribbean.

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St. Vincent and the Grenadines Tiffany Grosvenor- Drakes CIBC FirstCaribbean


Economic activity in St. Vincent and the Grenadines likely continued to advance during January to June 2019, sustained

by greater tourism, manufacturing and construction output.

Stay-over arrivals increased 7.7% y/y as the number of tourists from the US, the UK, Canada and all other

markets increased 13.9% y/y, 7.6% y/y, 17.9% y/y and 12.1% y/y, respectively, but arrivals from the Caribbean

fell 6.7% y/y. Cruise-ship arrivals increased 6.5% y/y despite a 5.8% decline in the number of calls due to larger

cruise-ships making calls, while yacht arrivals also rose (up 14.9% y/y) during the period. However, the number of

excursionists fell 6.2% y/y. Overall, total visitor arrivals and visitor expenditure increased 8.1% y/y and 15.0% y/y,

respectively.

Construction output likely advanced as capital spending, primarily associated with the geothermal project, and the

Banana Accompanying Measures project, tripled to US$13.6mln. Other indicators of investment activity also

suggest an improved outturn as imports of inedible crude materials except fuels and imports of machinery and

transport equipment advanced 19.6% y/y and 33.0%, respectively.

Manufacturing activity likely grew as increased production of flour (up 1.0% y/y), feeds (up 39.8% y/y) and rice (up

53.0% y/y), coupled with a modest expansion in the output of building materials, outweighed a 6.3% y/y decline in

beer production. Agriculture output is also estimated to have grown during the period.

Higher prices of food and non-alcoholic beverages (up 1.6% y/y) and transport (up 0.6% y/y) contributed to 0.5% y/y consumer price inflation at September 2019. However, the price of housing utilities, gas and fuels fell 0.6% y/y.

Developments in Financial Markets Declining credit to the corporate sector and greater deposit accumulation increased excess liquidity over the year to September 2019. Banks’ loan quality and capital adequacy improved, but profitability slipped over the same period.

Retail loans advanced 1.4% y/y. However, a 9.4% y/y decline in lending to the public sector and a 16.1% y/y

contraction in business lending pushed corporate loan balances 11.3% lower and induced a 2.3% y/y fall-off in

total loans and advances.

A 21.5% y/y expansion in corporate deposits eclipsed declines of 0.5% y/y and 4.9% y/y in retail and non-resident

deposits, respectively, increasing total deposits 6.3%.

Consequently, the loan-to-deposit ratio fell 5.6 percentage points y/y to 64.4% at September 2019. The weighted

average lending and deposit rates fell 9bps and 10bps over the same period to 8.34% and 1.70%, respectively.




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The non-performing loan ratio fell from 7.0% in September 2018 to 6.4% in September 2019, while the regulatory

capital-to-risk-weighted assets ratio rose marginally y/y to 23.3% during the same period. However, banks’

annualised return on assets fell to 0.75% in September 2019 from 0.98% one year earlier.

Government Debt

The fiscal deficit widened US$13.8mln to US$15.2mln as increased current and capital expenditure overshadowed

improved revenue collection during the first six months of 2019.

Government’s current receipts increased US$5.1mln (5.1% y/y) as taxes on income and profits, property, and

goods and services rose US$3.6mln (4.2% y/y), US$0.2mln (0.9% y/y) and US$0.8mln (23.1% y/y), respectively,

but taxes on international trade and transactions fell US$1.4mln (10.9% y/y). Non-tax collections rose US$1.6mln

(10.9% y/y). However, capital revenue and grants declined US$2.9mln (50.6% y/y).

Both current and capital spending advanced during H1 2019. Expenditure on personal emoluments, goods and

services, interest payments and transfer and subsidies increased US$3.1mln, US$1.1mln, US$0.1mln and

US$1.9mln, respectively, while capital outlays rose US$9.1mln to US$13.6mln during the period.

The public sector debt stock increased 4.1% y/y to US$627.9mln and 3.0 percentage points y/y to 77.4% of 2018 GDP at June 2019. Central government debt rose 5.9% to US$584.4mln, but public corporations’ debt fell 15.9% y/y to US$43.5mln.

Outlook

The ECCB predicts a 2.5% economic expansion in St. Vincent and the Grenadines in 2019, underpinned by tourism

activity and supported by construction, manufacturing and agricultural output. The ECCB projects the tourism sector, in

particular, to benefit from expected increased airlift into the Argyle International Airport, marketing and brand promotion,

and greater accommodation capacity. However, the government’s fiscal deficit is likely to be wider in 2019 given the

spending observed during the first half of the year.




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Suriname Tiffany Grosvenor-Drakes CIBC FirstCaribbean

Production, Prices, and Employment Preliminary data from the Centrale Bank van Suriname suggest investment activity likely improved during the first nine months of 2019, but led to a deterioration of the external current account balance.

Imports of investment goods and transportation advanced US$72.0mln and US$55.8mln, respectively, likely

partially driven by greater oil exploration by Staatsolie. Further, the government’s capital spending almost doubled

during H1 2019.

Overall, total goods imports increased US$161.7mln, while total goods exports fell US$12.6mln. The lower

surplus balance on goods, combined with higher deficits on the balance of services (US$116.7mln) and income

(US$70.4mln) and an US$11.7mln lower surplus balance on current transfers, widened the external current

account deficit by US$268.8mln to US$308.2mln during January to September 2019.

Latest unemployment statistics indicated that unemployment declined from 9.7% in 2016 to 7.6% in 2017, as the number of employed persons rose 3.1% y/y and the number of unemployed persons fell 21.6% y/y.

Consumer price inflation continued to trend downward and reached 4.3% during November 2019 compared to 5.5% one year earlier.


Total loans and advances increased 7.3% y/y over the 12 months to October 2019. Robust growth in public sector lending

led to a 5.5% y/y expansion in corporate loans, while retail lending advanced 14.1% during the period.

Total loans and advances in local currency rose 6.2% y/y, reflecting increased corporate lending to businesses

(up 22.4% y/y) and greater retail lending for consumer loans (up 26.6% y/y) and mortgages (up 18.7% y/y).

However, lending to the public sector dipped 32.3%.

Loans denominated in foreign currency rose 8.7% y/y as a 13.3% y/y decline in business loans and a 13.5% fall-

off in retail mortgages partially offset a 117.1% y/y expansion in public sector loans and a 1.3% y/y increase in

consumer loans.

A 15.6% y/y increase in local currency deposits outweighed a 4.9% y/y contraction in foreign currency deposits, lifting total

deposits 2.3% y/y over the year to October 2019.

The average interest spread increased 120bps y/y to 6.2% at October 2019, as the weighted average lending rate rose

80bps y/y to 15.1%, but the weighted average deposit rate fell 40bps y/y to 8.9%.

Chart 1 Real GDP Growth (%)


Source: Centrale Bank van Suriname and CIBC FirstCaribbean. Source: Centrale Bank van Suriname and CIBC FirstCaribbean.

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The Central Bank’s stock of FX reserves rose 13.8% y/y to US$660.6mln (equivalent to about 14.2 weeks of imports of

goods and services) at the end of December 2019. The SRD/US$ remained stable at 7.46:1 in December 2019, reflecting

no change since July 2018.

Government Debt

Preliminary data from the Ministry of Finance suggest that the government’s deficit widened US$46.8mln to US$223.7mln

over H1 2019 as an expansion in revenue receipts could not keep pace with the surge in government spending.

Specifically, government’s expenditure rose 26.4% y/y, despite the slashing of arrears payments for previous years to less

that one-fifth of that in H1 2018.

Revenue collections advanced US$75.8mln (23.4% y/y). Direct and indirect tax revenues expanded US$39.0mln

(36.8% y/y) and US$22.3mln (18.1% y/y), respectively, while non-tax revenues rose US$12.8mln (13.6% y/y).

Even with US$59.9mln less in arrears payments, total expenditure rose US$122.6mln (24.5% y/y), reflecting

expansions in both current and capital spending. Current spending increased US$83.3mln (18.1% y/y) as greater

spending on wages and salaries (up US$64.1mln) and goods and services (up US$39.2mln) overshadowed

declines in interest payments (down US$15.0mln) and subsidies (down US$5.0mln). Further, capital expenditure

rose US$39.2mln (97.2% y/y) to US$79.6mln during the period.

The government’s total debt stock rose 14.5% y/y to US$2.77bln. External debt increased 6.8% y/y to US$1.80bln while

domestic debt rose 27.9% y/y to US$969.2mln at the end of November 2019.

Outlook

In its 2019 Article IV Consultation on Suriname, the IMF projects real GDP growth of just over 2% over the medium term

and continued low inflation. Potential upsides to growth lie in the ongoing oil exploration by Staatsolie, while the external

current account deficit is expected to reach its peak by the end of 2019 due to elevated imports largely resulting from the

same. However, the fiscal deficit is expected to reach near 9% of GDP in 2019 and the National Assembly recently raised

the public debt limit from 60% to 95% of GDP. The Government’s planned implementation of a 15% VAT in late 2021,

better revenue and customs administration, and lower electricity subsidies resulting from the transfer of the Afokaba dam

to the government at the end of 2019 are expected to improve the deficit over the medium term, but public debt is still

projected to increase to 87% of GDP by 2024. Meanwhile, the political climate in Suriname intensified ahead of the May

2020 general election following the recent conviction of President Bouterse.


Chart 4 Interest Rates (%)

Source: Centrale Bank van Suriname and CIBC FirstCaribbean. Source: Centrale Bank van Suriname and CIBC FirstCaribbean.

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Trinidad and Tobago Tiffany Grosvenor-Drakes CIBC FirstCaribbean


Revised estimates from the Central Statistical Office suggest that real GDP declined 0.2% in 2018, compared to the

previous estimate of a 1.9% expansion. Against this backdrop, the Central Bank of Trinidad and Tobago (CBTT)

estimates that slippage in both energy and non-energy output likely reduced economic activity during the first two quarters

of 2019, while preliminary indicators suggest a mixed performance over the remainder of the year.

Energy output fell approximately 3.4% y/y during H1 2019. Following a boost by the Angelin platform in Q1 2019,

natural gas production fell in Q2 due to a temporary work stoppage at a major natural gas consumer, resulting in

an overall decline of 0.7% during H1 2019. Further, the production of crude oil slumped 12.1% y/y, reflecting the

continued challenges associated with the mature acreage, while the total depth drilled and the number of rig days

declined 22.5% y/y and 16.6% y/y, respectively. In contrast, real value-added in the petrochemical sector rose

6.2% y/y, reflecting greater output of ammonia (up 9.3% y/y) and methanol (up 4.3% y/y) following downtime

experienced one year earlier. Since then, production of methanol and ammonia expanded 13.5% and 11.1% y/y,

respectively, while output of natural gas and liquefied natural gas rose 1.5% y/y and 3.1% y/y, respectively, during

January to October 2019. However, crude oil production contracted 8.1% y/y, while depth drilled and the number

of rig days fell 12.5% y/y and 9.4% y/y, respectively, over the same period.

Non-energy output is estimated to have declined marginally during the six-month period. Distribution activity likely

registered an almost flat performance, but real value-added in the construction and manufacturing sectors

declined 0.6% y/y and 2.6% y/y, respectively. Since then, domestic production and local sales of cement

increased 2.4% y/y and 0.6% y/y, respectively, during 2019, implying an improvement on the H1 construction

performance, but the number of new motor vehicles sold continued to slide (down 3.5% y/y) during January to

November 2019, pointing to likely persistent weakness in the distribution sector.

Core prices increased 0.6% y/y, but food prices fell 1.1% y/y, moderating the growth in retail prices to 0.3% y/y during November 2019.


Loan growth outpaced deposit growth and reduced excess liquidity over the 12 months ended October 2019. Loan quality

remained unchanged y/y at the end of the same period.

Total loans and advances rose 10.3% y/y, reflecting greater corporate and retail lending. Loans to businesses and

the public sector increased 4.7% y/y and 36.0% y/y, respectively, pushing corporate loans 12.8% higher y/y, while

the outstanding balance of consumer loans and mortgages advanced 1.1% y/y and 10.3% y/y, respectively.

Greater demand (up 5.5% y/y), savings (up 4.2% y/y) and time (up 3.1% y/y) deposits lifted total deposits 4.6%

y/y.

Chart 1 Key Economic Indicators (y/y; %)

Chart 2 Key Commodity Prices (US$)

Source: Central Bank of Trinidad and Tobago and CIBC FirstCaribbean. Source: International Monetary Fund, Central Bank of Trinidad and Tobago and CIBC FirstCaribbean.

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Consequently, commercial banks’ loan-to-deposit ratio rose to 68.4% at October 2019 from 64.8% at October

2018. The non-performing loans to gross loans ratio remained unchanged y/y at 3.0% at the end of the same

period.

The Trinidad and Tobago composite stock price index increased 12.7% y/y during December 2019, following a 2.9% rise

in 2018.

The CBTT’s net official FX reserves continued on its downward trajectory at October 2019. FX reserves fell 4.3% y/y to

US$7.10bln (7.9 months of import cover). The TTD/US$ exchange rate remained unchanged y/y at 6.78:1 at the end of

December 2019.

Government Debt

The government’s fiscal deficit improved US$333.5mln to US$733.4mln during the first 11 months of FY2018/19 ended

August 2019 on account of higher revenues, which outpaced increased spending. However, the non-energy fiscal deficit

worsened US$140mln to US$2.52bln as the expansion in non-energy revenue could not keep pace with the increased

government spending.

Expansions of both energy (up 40.0% y/y) and non-energy revenue (up 4.5% y/y) pushed total current revenue

US$688.9mln (13.8% y/y) higher. Tax revenue advanced US$77.9mln (1.9% y/y), reflecting greater collection of

taxes on income and profits (up US$232.5mln), property (up US$6.4mln) and international trade (up US$8.7mln).

However, a US$156.4mln fall-off in value-added taxes (VAT) due primarily to increased VAT refunds was largely

responsible for a US$169.6mln reduction in taxes on goods and services, and moderated the expansion in tax

revenue. Meanwhile, non-tax receipts increased US$423.1mln (51.6% y/y), partially boosted by higher equity

profits from the Central Bank, and capital revenue rose US$58.5mln (68.9% y/y) bolstered by receipts linked to

the sale of CL Financial assets.

Total government expenditure increased US$413.9mln to US$6.55bln over the 11-month period. Costs

associated with the closure of Petrotrin contributed to a US$254.3mln (7.6% y/y) expansion in transfers and

subsidies, while spending on wages and salaries, goods and services and interest payments rose US$4.2mln

(0.3% y/y), US$48.9mln (7.0% y/y) and US$15.5mln (3.1% y/y), respectively. Further, capital outlays advanced

US$91.0mln (25.1% y/y).

The CBTT reports that preliminary estimates indicate a US$258.4mln improvement in the fiscal deficit to US$581.7mln or

2.4% of GDP for the full fiscal year ended September 2019, compared to 3.6% of GDP in FY2017/18. Energy revenue

rose US$554.5mln y/y but non-energy receipts contracted US$74.6mln y/y. When combined with a US$241.5mln

expansion in government spending, the non-energy fiscal deficit deteriorated to US$2.76bln.

Gross public sector debt fell 1.7 percentage points y/y to 74.4% of GDP at September 2019, as central government debt

declined 2.0 percentage points y/y to 55.9% of GDP, but contingent liabilities rose 0.2 percentage points y/y to 18.4% of

GDP. Central government domestic debt fell from 42.1% to 39.8% of GDP, but central government external debt rose

from 15.8% to 16.1% of GDP.

Outlook

Real GDP growth continues at a subdued pace, but the CBTT remains optimistic regarding an improvement of economic

activity in the second half of 2019. The return of natural gas and liquefied natural gas production to normal levels following

temporary interruptions and maintenance activity in H1 2019 is expected to support energy production. Further, the Bank

expects that, in addition to spillover effects from the energy sector, the Government’s increased spending on capital

projects could likely boost the non-energy sector. However, the Government’s budget estimates suggest a widening of the

fiscal deficit to 3.1% of GDP during FY2019/20, implying limited prospects for fiscal consolidation. Meanwhile, the

Government has agreed to sell Petrotrin to Patriotic Energies and Technologies Company Limited (PETCL), owned by the

Oilfield Workers Trade Union (OWTU).





Source: Central Bank of Trinidad and Tobago and CIBC FirstCaribbean. Source: Central Bank of Trinidad and Tobago and CIBC FirstCaribbean.

Chart 5 US$/TTD Exchange Rate

Chart 6 Capital Market Indicators

Source: Central Bank of Trinidad and Tobago and CIBC FirstCaribbean. Source: Central Bank of Trinidad and Tobago and CIBC FirstCaribbean.

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Composite Stock Price Index (L)

91-day T-bill Rate (R)



Turks and Caicos Tiffany Grosvenor-Drakes CIBC FirstCaribbean


In the absence of updated economic performance indicators of the Turks and Caicos Islands, the Government’s Fiscal

and Strategic Policy Statement (FSPS) 2020-2024 suggests that economic activity in the Turks and Caicos Islands

continued to advance in 2019.

The Government reports that activity in the construction, tourism and real estate sectors was expected to increase

by more than 3% in 2019, while agriculture and fish production was projected to grow by 2%.

A continuation of repair efforts, alongside other private sector projects, likely supported construction output,

including the ongoing work at the FDI-funded Ritz Carlton. Further, the Government’s capital spending on

reconstruction work to schools and other government buildings likely complemented this activity.


Declining loan balances amid moderate deposit growth increased excess liquidity over the year ended September 2019.

Loan quality remained around the level recorded one year earlier, while capital adequacy improved over the same period.

Business loans advanced 2.0% y/y, but lending to the public sector contracted 44.4% y/y, lowering corporate loan

balances 0.3% y/y, while retail balances also dipped (1.7% y/y). Total loans and advances fell 1.1% y/y.

A 13.0% y/y expansion in corporate deposits eclipsed reductions of 4.4% y/y and 3.7% y/y in retail and non-

resident deposits, respectively, increasing total deposits 5.9% y/y.

Consequently, the loan-to-deposit ratio fell 4.3 percentage points y/y to 60.9% at September 2019.

Meanwhile, the non-performing loan ratio was recorded at 5.9% at September 2019, unchanged from one year

earlier, and the capital adequacy ratio improved 3.3 percentage points y/y to 30.7% at the end of the same period.

Chart 1 Key Economic Indicators (GDP Growth; %)


Source: Turks and Caicos Statistical Office, S&P and CIBC FirstCaribbean. Source: Turks and Caicos Statistical Office, S&P and CIBC FirstCaribbean.

-4

-2

0

2

4

6

8

2010 2011 2012 2013 2014 2015 2016 2017 2018

Real GDP Growth

0

1

2

3

4

5

6

2010 2011 2012 2013 2014 2015 2016 2017 2018

All Items



Government Debt

The government of the Turks and Caicos Islands’ produced a US$20.0mln operating surplus during the first two months of

the fiscal year 2019/20 ended May 2019, below the prior year’s outturn of US$27.9mln but above the budgeted estimate

of US$15.8mln.

Total revenues collected by the government declined US$1.4mln (2.3% y/y) and fell short of the budgeted amount

by US$1.6mln (2.6%). Recurrent receipts rose 2.0% y/y to US$58.5mln, but non-recurrent revenue fell by

US$2.5mln (98.5% y/y).

Government spending increased US$6.6mln (20.5% y/y), but was US$5.8mln (2.6%) less than the budgeted

amount. Recurrent expenditure advanced 20.5% y/y to US$37.2mln, while non-recurrent outlays rose 20.1% y/y

to US$1.4mln.

Total government debt fell from US$9.4mln at the beginning of the fiscal year to US$6.5mln at the end of May 2019.

Outlook

The Turks and Caicos Statistical Department projects economic growth of 3.8% in 2019 and 3.2% in 2020, led by tourism,

construction and real estate activity. Further, fishing output and, by extension, agricultural production are expected to

benefit from greater education of fishermen and enforcement of policies by government to restrict illegal activity in that

sector. Meanwhile, the government now expects a US$33.5mln fiscal surplus for the 2019/20 fiscal year, compared to the

budgeted surplus of US$11.5mln.


Source: Turks and Caicos Financial Services Commission and CIBC FirstCaribbean.

-15

-10

-5

0

5

10

15

20

25


Growth in Loans

Growth in Deposits



About CIBC

CIBC is a leading North American financial institution. From Personal, Business, and Commercial Banking to Wealth

Management and Capital Markets businesses, our 45,000 employees provide a full range of financial products and

services to 10 million clients in Canada, the United States and around the world.

For more than 150 years, CIBC has been a strong community partner that makes a positive impact through our corporate

giving, sponsorships and the volunteer spirit of our team members. In 2019, CIBC invested more than $78 million in

community organizations across Canada and the U.S., including over $57 million in corporate contributions and nearly $21

million in employee-led fundraising and giving.

Canadian Personal and Business Banking

Canadian Personal and Business Banking provides clients across Canada with financial advice, products and services

through a team in our banking centres, as well as through our direct, mobile and remote channels.

Our goal is to build a modern consumer and business relationship bank to help our clients achieve their ambitions by

focusing on three key strategic priorities:.

Winning at relationships

Delivering market-leading solutions

Being easy to bank with

Canadian Commercial Banking and Wealth Management

Canadian Commercial Banking and Wealth Management provides high-touch, relationship-oriented banking and wealth

management services to middle-market companies, entrepreneurs, high-net-worth individuals and families across

Canada. We also provide asset management services to institutional investors.

We are focused on building and enhancing client relationships, being Canada’s leader in financial advice and generating

long-term, consistent growth. To deliver on this, our three strategic priorities are:

Scaling commercial banking

Increasing agility and efficiency in wealth management

Deepening client relationships across our bank

U.S. Commercial Banking and Wealth Management

U.S. Commercial Banking and Wealth Management provides high-touch, relationship-oriented commercial, personal and

business banking, as well as wealth management services to meet the needs of middle-market companies, executives,

entrepreneurs, high-net-worth individuals and families in the U.S. markets we serve

Our goal is to build the best-in-class commercial and wealth management bank for our chosen client segments and

markets with a focus on developing deep, profitable relationships leveraging the full complement of CIBC’s products and

services across our North American platform. To deliver on this, our three key strategic priorities are:

Growing organically by adding and deepening our client relationships and selectively entering additional markets

and specialty businesses

Continuing to build a strong U.S. operating platform by investing appropriately in our growth

Maintaining our risk discipline through selective evaluation of new opportunities, portfolio diversification, and

quality of funding sources



Capital Markets

Capital Markets provides integrated global markets with products and services, investment banking advisory and

execution, corporate banking solutions, and top-ranked research to corporate, government and institutional clients around

the world.

Our goal is to be the leading capital markets franchise for our core clients in Canada and the lead relationship bank for our

key clients globally by delivering best-in-class insight, advice and execution. To enable CIBC’s strategy and priorities, we

collaborate with our partners across our bank to deepen and enhance client relationships. To deliver on our goal, our three

key strategic priorities are:

Being the leading capital markets platform in Canada for our core clients

Building a North American client platform with global capabilities

Increasing connectivity across CIBC to deliver better service for clients



About CIBC FirstCaribbean

CIBC FirstCaribbean International Bank is a relationship bank offering a range of market-leading financial services through

our Corporate Investment Banking, Wealth Management, and Retail Banking segments.

Headquartered in Warrens, Barbados, we provide banking services to our clients through approximately 3,100 employees,

in 100 branches and offices. We are one of the largest, regionally listed financial services institution in the English and

Dutch-speaking Caribbean.

As a member of the CIBC Group of companies, we share with them an organizational culture based on core values of

Trust, Teamwork, and Accountability.

CIBC FirstCaribbean operates within a well regulated environment, under the supervision of the ten banking regulators

across our 16 markets, including Antigua and Barbuda, Aruba, The Bahamas, Barbados, British Virgin Islands, Cayman

Islands, Curaçao, Dominica, Grenada, Jamaica, St. Kitts and Nevis, St. Lucia, St. Maarten, St. Vincent and the

Grenadines, Trinidad and Tobago and Turks and Caicos Islands.

CIBC FirstCaribbean is traded on the stock exchanges of Barbados, Trinidad and Tobago, The Bahamas and Eastern

Caribbean.

A full service institution, we lead the market in providing innovative solutions for our clients, including:

State-of-the-art branch banking which is currently being rolled out across the region, featuring a functional,

ergonomic environment with electronic, seated queuing systems for service identification and prioritization;

dedicated corporate banking facilities and wealth management services in an upscale, lounge-type setting

A range of electronic banking solutions for full service in quick time, including an enhanced internet and mobile

banking service.

Enhanced private banking service for Domestic Wealth Management clients, including Platinum Service priority

access in branches, dedicated wealth management centres, financial advice by certified financial planning experts

and Platinum cards services for the discerning customer.

Support for corporate clients with best-in-class relationship management products and services.

CIBC FirstCaribbean is focused on developing strong relationships with its clients and is committed to being a best

practice institution, with a focus on listening to and working closely with our clients to help them achieve what matters to

them.

Caribbean Market Overview – Q1 2020


Notes

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Luis HurtadoDirector

FICC Strategy Fixed Income Currencies & Distribution

CIBC Capital Markets Brookfield Place

161 Bay Street, 5th Floor Toronto, ON M5J 2S8 Tel. +1 416 594-8284

[email protected]

Paul DouglasExecutive Director

Global Markets Caribbean and Latin America

CIBC Capital Markets Brookfield Place

161 Bay Street, 5th Floor Toronto, ON M5J 2S8 Tel. +1 416 594-8506

[email protected]

Dean ChangExecutive Director & Head

Client Solutions Group CIBC FirstCaribbean International Bank

Head Office Warrens, St. Michael BB22026 Barbados Tel: +1 246 367-2845

[email protected]

Tiffany Grosvenor-DrakesSenior Manager,

Strategy and Economics CIBC FirstCaribbean International Bank

Head Office Warrens, St. Michael BB22026 Barbados Tel: +1 246 367-2227

[email protected]

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