Banking at the Crossroads Annual Conference The Caribbean Association of Banks Everson W. Hull Basseterre St.Kitts November 12, 2015 1
Outline The Fragile Pillars of Economic Growth Subdued rates of growth in consumer spending Anemic/non-existent growth in business capital investment Encouraging signs of restraint on government spending Imports imposing a heavy deadweight burden Implications for Banking Monetary Policy Meeting the Needs of Trade and commercial Activity The Banking Threats U.S. State-level Tax Haven Legislation FATCA Appraisal of The New Southern Frontier Mexico, Central and South America 2
$60 CARICOM COUNTRIES -- THE FRAGILE PILLARS (Billions of U.S.. Dollars) Consumer Expenditures Capital Investment Exports Imports GDP 58.1 $50 48.1 51.3 52.0 $40 $30 26.9 27.0 36.2 26.5 26.5 38.0 29.7 41.9 31.4 31.8 34.2 38.2 22.7 33.5 24.3 35.0 37.0 26.4 27.2 36.2 27.0 37.8 $20 17.9 18.2 $10 13.9 13.1 13.5 13.9 6.6 6.9 9.2 10.0 10.2 9.4 9.0 9.9 9.4 9.6 $0 -$10-13.0-13.0 A $32 billion Import Bill-- A deadweight loss that drags the system down -$20-17.7-18.8-21.1 3 -$30 -$40-24.9-26.3-25.8-28.8-27.0-31.9-31.5-32.3-33.9 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
4% ECONOMIC GROWTH -- ALL CARICOM COUNTRIES PRE- AND POST- FINANCIAL CRISIS (Average Annual Rates of Growth in GDP in Constant U.S. Dollars) BEFORE (2000 to 2008) AFTER (2009 to 2013) 3.3% 3% 2% 1% 0.2% 4 0% Gross Domestic Product
8% 7.6% THE COLLAPSE IN ECONOMIC GROWTH PRE- AND POST FINANCIAL CRISIS (Average Annual Rates of Growth in GDP -- Constant 2005 U.S. Dollars) BEFORE (2000 to 2008) AFTER (2009 to 2013) 6% 5.4% 5.0% 4.6% 4.6% 4% 3.9% 3.8% 3.7% 3.2% 3.1% 2% 2.3% 2.6% 1.7% 1.6% 2.0% 0.7% 0.5% 0.0% 0% -0.5% -0.6% -0.9% -1.0% -0.5% -0.2% -2% -4% Trinidad and Tobago Belize -3.4% Antigua and Barbuda Suriname St. Vincent and the Grenadines St. Kitts and Nevis -3.7% Grenada Dominica St. Lucia Barbados Bahamas Guyana Haiti 5
CARICOM member states hard hit With the exception of Guyana and Haiti all CARICOM member states experienced a contraction in growth rates Antigua and Barbuda has seen a sharp decline in a very robust pre-crisis growth rate of +5.0 percent to -3.4 percent Barbados has experienced a post-crisis reduced average annual growth rate of -3.7 percent Strong reversals are shown for Guyana and Haiti Guyana s sharp recovery of +4.6 percent reverses the severe negative effects experienced in 2005 (-2.0%) and 2006 (-5.3%) Haiti has benefited from the sharp increase in bilateral and multilateral assistance after the devastating earthquake of 2010. For all countries, what was a reasonable pre-crisis growth rate of +3.3 percent has been reduced to a growth rate of +0.2 percent. 6
REDUCED DEPENDENCE ON BIG-GOVERNMENT ALL CARICOM COUNTRIES COMBINED PRE- AND POST- FINANCIAL CRISIS (Government Expenditures as a Percent Share of GDP) 18% BEFORE (1980 to 2008) AFTER (2009 to 2013) 18.1% 16.7% 16% 14% 7 12%
22% REDUCED DEPENDENCE ON BIG-GOVERNMENT PRE- AND POST- FINANCIAL CRISIS (Government Expenditures as a Percent Share of GDP) 21.1% BEFORE (1980 to 2008) AFTER (2009 to 2013) 20% 20.0% 19.7% 18% 17.4% 17.3% 19.0% 18.3% 18.6% 18.7% 17.0% 18.0% 16% 14.8% 16.1% 16.2% 16.0% 15.5% 15.2% 14.3% 14% 12% Guyana Dominica St. Vincent and the Grenadines Antigua and Barbuda St. Kitts and Nevis Grenada St. Lucia Belize Barbados 8 -- Years missing for The Bahamas, Trinidad and Tobago and Suriname
Reduced dependence on government is encouraging Grounds for Optimism With the exception of St.Kitts and Nevis and Barbados, all member states have shown a reduced dependence on Government. Reduced government Reduces the demand for loanable funds in general and reduces upward pressure on interest rates; Reduces current account deficits and cumulative public debt; Results in lower cost of servicing the public debt, which frees up funds which could otherwise be used for building roads and also for reducing taxes 9
INFLATION -- ALL CARICOM COUNTRIES COMBINED PRE- AND POST- FINANCIAL CRISIS (Average Annual Rates of Change in the Consumer Price Index) 7% 6% BEFORE (2000 to 2008) AFTER (2009 to 2013) 6.3% 5% 4% 3.6% 3% 2% 1% 10 0% Consumer Price Index
22% 20% 21.0% SUBDUED RATES OF INFLATION PRE- AND POST- FINANCIAL CRISIS (Average Annual Rates of Change in the Consumer Price Index) BEFORE (2000 to 2008) AFTER (2009 to 2013) 18% 17.0% 16% 14% 12% 11.3% 10% 8% 6% 6.3% 5.2% 9.2% 7.4% 6.5% 6.2% 5.0% 4% 2% 0% 11 2.8% Suriname Haiti Jamaica Guyana Trinidad and Tobago 3.7% 3.6% 3.3% 3.2% 3.1% 2.9% 2.4% 2.3% 2.2% 2.1% Barbados St. Kitts and Nevis St. Vincent and the Grenadines 1.7% 1.7% 2.0% 0.6% 1.8% 1.4% 2.1% Grenada St. Lucia Belize Bahamas Dominica Antigua and Barbuda
40% 40.6% GROWTH IN THE MONEY SUPPLY -- M2 PRE- AND POST- FINANCIAL CRISIS (Annual Percent Change) BEFORE (2000 to 2008) AFTER (2009 to 2013) 30% 20% 15.9% 16.6% 16.4% 12.3% 13.4% 13.3% 11.4% 11.6% 10.6% 10.4% 10% 0% 12 6.3% 8.6% Suriname Jamaica Haiti Trinidad and Tobago 0.6% 4.8% 8.8% Barbados Guyana Belize St. Kitts and Nevis 8.4% 8.3% 8.1% 7.2% 6.5% 2.9% 1.1% St. Lucia Grenada Antigua and Barbuda 1.3% Bahamas, The 5.9% Dominica 4.7% 2.9% St. Vincent and the Grenadines
20% THE DISCOUNT RATE U.S.A. Versus Selected Countries (Percent) Pre-Crisis (2007) Post Crisis (2009 and 2010) 15% 15.0% 12.0% 12.0% 10% 10.0% 5% 4.8% 5.3% 6.5% 5.5% 5.8% 6.5% 6.5% 7.0% 2.3% 13 0% 0.5% USA Bahamas, The Guyana Trinidad and Tobago Source: CIA World Factbook OECS Barbados Belize
60% 56% INCREASED BANK LENDING 1 IN RESPONSE TO THE "NEEDS OF TRADE" PRE- AND POST- FINANCIAL CRISIS (Bank Credit Extended to the Private Sector as a Percent Share of GDP) BEFORE (2000 to 2008) AFTER (2009 to 2013) 56.5% 52% 48% 47.9% 44% 14 40% 1 Broadly defined includes loans, purchases of non-equity securities, trade credits and other accounts receivables
110% 100% 110.4% INCREASED BANK LENDING 1 IN RESPONSE TO THE "NEEDS OF TRADE" PRE- AND POST- FINANCIAL CRISIS (Bank Credit Extended to the Private Sector as a Percent Share of GDP) BEFORE (2000 to 2008) AFTER (2009 to 2013) 90% 80% 81.3% 80.2% 74.1% 81.7% 81.2% 70% 60% 50% 64.9% 64.7% 63.6% 63.2% 65.7% 60.0% 55.1% 52.0% 52.6% 53.5% 49.2% 47.5% 15 40% 30% 20% 10% St. Lucia Barbados Antigua and Barbuda Bahamas, The Grenada St. Kitts and Nevis Belize St. Vincent and the Grenadines 40.8% 36.6% 31.7% 32.4% Dominica Guyana Trinidad and Tobago 28.1% 21.5% 24.5% 16.7% 15.4% 14.1% Jamaica Suriname Haiti 1 Broadly defined includes loans, purchases of non-equity securities, trade credits and other accounts receivables
8.5% FOREIGN DIRECT INVESTMENT: ALL CARICOM COUNTRIES PRE-AND POST-FINANCIAL CRISIS (Percent Share of GDP) 8.0% BEFORE (2000 to 2008) AFTER (2009 to 2013) 8.0% 7.7% 7.5% 7.0% 6.5% 6.0% 16 5.5%
20% 15% 18.3% FOREIGN DIRECT INVESTMENT NET INFLOWS PRE- AND POST- FINANCIAL CRISIS ( Percent Share of GDP) 15.4% 16.3% 12.7% 12.4% 12.4% BEFORE (2000 to 2008) AFTER (2009 to 2013) 15.5% 12.5% 10% 8.6% 7.9% 8.3% 7.9% 8.6% 7.8% 5% 7.6% 7.3% 7.3% 7.2% 6.6% 5.8% 4.8% 5.5% 4.1% 0% 2.7% 1.9% 0.8% 0.1% -5% -6.1% -10% 17 St. Kitts and Nevis Antigua and Barbuda Grenada St. Lucia St. Vincent Trinidad and the and Tobago Grenadines Belize Dominica Guyana Jamaica Bahamas, The Barbados Haiti Suriname
CORPORATE INCOME TAX RATES 2013 U.S.A FEDERAL CORPORATE versus BLACK LISTED COUNTRIES 35% 30% 25% 20% 15% 10% 18 Source: Price Waterhouse Coopers Worldwide Tax Summaries (Available Data for DC "Tax Havens and EC "Non-Cooperative Tax Jurisdictions")
U.S.A. CORPORATE INCOME TAX RATES 2013 HIGH TAX STATES versus LOW TAX STATES 12% 12.0% 10% 10.0%10.0% 9.8% 9.5% 9.4% 9.0% 9.0% 9.0% 8.9% 8% 6% 5.0% 5.0% 4.6% 4.5% 4% 2% 0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 19 Source: U.S.A. Tax Foundation
U.S.A. COMBINED FEDERAL (35%) AND STATE CORPORATE INCOME TAX RATES TEN HIGHEST TAX STATES versus TEN LOWEST TAX STATES 50% 47% Federal State 45% 40% 12% 10% 10% 10% 10% 9% 9% 9% 9% 9% 5% 5% 5% 5% 35% 0% 0% 0% 0% 0% 0% 30% 25% 20% 20 Source: U.S.A. Tax Foundation, State Corporate Income Tax Rates (State corporate taxes in California are 8.84 percent)
$12,000 PER CAPITA EXPORTS OF GOODS AND SERVICES IN 2013 FOR OAS MEMBER STATES a b (Current U.S. Dollars) $10,000 $8,000 $6,000 $4,000 $2,000 $0 21 a Not shown are the U.S.A and Canada with $7,156 and $15,633,respectively for exports of goods and services per capita b Data "NOT SHOWN" for USA and Canada. Also, data is not available for OAS-member countries not listed Source: World Bank W
25,000 INTERNATIONAL TOURISM ARRIVALS IN 2013 FOR OAS MEMBER STATES a (Thousands) 20,000 15,000 10,000 5,000 0 22 a Not shown are the U.S.A and Canada with 69,768,000 and 16,590,000 international tourism arrivals, respectively. For OAS countries with greater than 300,000 arrivals
$30,000 INTERNATIONAL TOURISM EXPENDITURES IN 2013 FOR OAS MEMBER STATES a, b (Millions of U.S. Dollars) $25,000 $20,000 $15,000 $10,000 $5,000 $0 23 a For Expenditures greater than $200 mill.. Not shown are the U.S.A and Canada with $136.7bill. and $35.2bill. b Also, data is not available for OAS-member countries not listed.
$25,000 PERSONAL REMITTANCES RECEIVED BY OAS MEMBER STATES IN 2013 a (Millions of Current U.S. Dollars) $20,000 $15,000 $10,000 $5,000 $0 24 a Data "NOT SHOWN" for USA and Canada. Also, data is not available for OAS-member countries not listed -- For Countries with more than $400 mllion in remittances. Source: World Bank--World Development Indicators
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