Anguilla
Economic and Financial Review: 2022 Half-Year (2022H1)

Overview

Snapshot of Economic and Financial Developments for 2022H1

The Economy (Real Sector)

Economic activity rebounded largely due to a reversal in the fortunes of the hotels and restaurants sector which directly contributed about 28.5 per cent of GDP, pre pandemic (2019). The expansion in tourism activity also positively impacted related sectors; construction, wholesale and distribution and real estate and renting and business activities. During the first half of 2022, total visitors rebounded fourfold to 42,728 of which 38,210 were stay-over arrivals. The sharp increase reflected rebounds in the performance of all of the major source markets, attributable to the gradual resumption of global travel coupled with the easing of entry protocols at the air and sea ports during the first half of 202 (Figure 1). The number of stay-over visitors for January to June 2022 exceeded the previous half year average for the last five (5) years (2017 to 2021), however, the recovery in excursionists over the same period was less potent.

Among the major markets for stay-over arrivals, the USA retained the largest share of the tourism market accounting for 79.2 per cent, followed by Canada, the UK and the Caribbean respectively which collectively accounted for another 12.9 per cent of stay-over visitors.

Construction activity is estimated to have picked-up as development work continued at the Aurora Anguilla Resort, the construction of a modernized spa facility at Belmond Cap Juluca and on-going residential construction stimulated by financing initiatives launched by banking institutions.

Overall, the economy is estimated to have expanded in the first six months of 2022, driven by greater tourism activity and positive developments in construction, wholesale and retail trade, transport, storage and communications and real estate, renting and business activities.

Consumer Prices

Supply chain and geo-political developments continued to impact domestic prices particularly the cost of energy and food during the period under review. The Consumer Price index (period average) rose by 1.9 per cent in the first half of 2022 (see Figure 2), a slight uptick from the 1.6 per cent increase in the corresponding period of 2021.

Consistent with recent developments, the major factors accounting for the higher level of inflation were increased prices for food and non-alcoholic beverages (6.5 per cent), and housing utilities gas and fuels (5.5 per cent). One mitigating factor was the decline in the price paid for transport which fell by 1.9 per cent due to on average, lower airline ticket prices to the USA, Dominican Republic and the USVI.

Government Operations

The fiscal balance of the central government strengthened further in the first six months of 2022 buoyed by higher tax revenue. An overall surplus of $62.4m was recorded, compared with one of $36.0m realised for the comparable period of 2021 (see Figure 3).

Current revenue receipts rose by 34.6 per cent to $166.1m, which was $42.7m higher than the level reported one (1) year ago and 48.0 per cent above the recent five (5) year average for January to June.

Tax revenue, which accounted for 82.8 per cent of current revenue, increased by 41.3 per cent ($40.2m) fuelled mainly by a rebound in receipts of hotel accommodation tax in line with the uptick in the tourism industry. Higher collections of import duty also contributed to greater tax receipts (Figure 4A).

Current revenue receipts were also supplemented by increases in non-tax revenue by $2.5m to $28.5m. Current expenditure (Figure 3) rose marginally by 1.0 per cent to $103.4m, driven mainly by higher outlays on goods and services and personal emoluments (Figure 4B). The outturn was 7.1 per cent higher than the last five (5) year average for January to June.

There were no current grants received during the period under review in contrast to receipts of $16.3m in the previous comparable period of 2021. Notwithstanding the decline in current grant inflows, the current account surplus widened to $62.7m up from $37.2m at the end of June 2021, well above average of the last five (5) years of $2.2m for January to June 2017 to 2021. Capital expenditure was negligible at $0.3m owing to spending constraints (Figure 4B).

Fig 4: Half-Year Trends in the Composition of Revenue and Expenditure

Banking Developments (Monetary)

At the end of June 2022, the net domestic assets of the banking sector expanded to $486.5m nearly double the $265.0 accumulated at the end of June 2021 for the most part influenced by an increase in central government deposits (liabilities).

Overall claims on the private sector rose by 3.3 per cent, on account of a 5.6 per cent increase in credit to households, moderated by a 0.1 per cent reduction in lending to businesses (see figure 6). Banking sector credit to the government or claims fell by $7.2m while deposits rose by $38.9m, consequently the net deposit position of the government rose to $121.9m, as depicted in Figure 6.

Fig 6:Claims to Selected Sectors

Transferable deposits² nearly trebled by $57.2m consistent with an improvement in labour market conditions as depositors return to work and increase their earnings. Foreign currency deposits also rose by $263.4m, while other deposits declined by $3.4m (see Figure 7).

Fig 7: Domestic Deposit Trends

Banking system asset quality improved as indicated by a reduction in the ratio of non-performing loans (NPLs) to gross loans by 1.9 percentage points to 22.3 per cent. The ratio of NPLs remains significantly above the ECCB’s prudential benchmark of 5.0 per cent, however, it is noteworthy that the majority of the loans in this category were as a result of a previous bank resolution process.

External Trade

Complementing more robust real sector activity, the merchandise trade deficit widened to $315.3m from $216.5m in the first six (6) months of 2021 (see figure 9). This imbalance exceeded the average merchandise trade deficit of $266.7m over the last five (5) year period ended 2021, by 18.2 per cent. An upswing in imports by 47.6 per cent ($107.9m) in support of the resurgent tourism industry, was the major contributing factor, while total exports nearly doubled to $19.5m.

Outlook

The medium term for Anguilla changed dramatically since the country was mired in the effects of the COVID-19 pandemic in 2020 and 2021. Subsequent to these events the country gradually relaxed travel entry protocols in 2022 and raised vaccination rates which helped stimulate the return of stay-overs visitors. However, the conflict between Ukraine and Russia which began early in 2022 has altered global and domestic prospects and threatens to stall the nascent recovery.

Selected Economic Indicators