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Caribbean Market Overview

Q1 2018
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Caribbean Market Overview – Q1 2018

Table of Contents (Click Through To Sections)

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
Jamaica ................................................................................................................................... 42
Panama ................................................................................................................................... 45
St. Kitts and Nevis ................................................................................................................... 47
St. Lucia .................................................................................................................................. 49
Sint Maarten ............................................................................................................................ 51
St. Vincent and the Grenadines .............................................................................................. 53
Suriname ................................................................................................................................. 55
Trinidad and Tobago ............................................................................................................... 57
Turks and Caicos .................................................................................................................... 60
About CIBC ............................................................................................................................. 62
About CIBC FirstCaribbean ..................................................................................................... 63
Notes ....................................................................................................................................... 64

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q4 2017 1

Caribbean Market Review

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 2

Caribbean Market Review Luis Hurtado


Macro Strategy
Summary

Short-lived periods of volatility in the emerging markets credit space continued, as fears of faster-than-expected reflation
resurfaced in the developed world, especially in the US. Moreover, concerns regarding protectionist measures around the
world continued with the US aluminum and steel tariffs announcement, which kept markets on alert to any retaliatory
measures. In the case of the Caribbean and Central American region, most credits with the exception of BAHAMA and
ELSALV widened in this environment. As we mentioned in our prior publication, the market had already started to move
away from the stars of the region (i.e. DOMREP, PANAMA) as positive developments dried up and credit valuations
remained rich. This continued during the last quarter and, in the case of DOMREP, this situation was exacerbated by the
US$ 1bln issuance of 30Y bonds in February. For the rest of the year, as in previous quarters, we would focus on credits
where we were starting to see an improving trend. The legislative election in El Salvador has created a positive
environment in the short-term with the approval of the 2018 budget and the favourable legislative election outcome on
March 4. Costa Rica, although improving on the margins as congress approved the fast-track route for the long awaited
VAT and Income tax bills, still has to deal with the second round elections and a fragmented congress - an interesting
story to keep track of in 2018.
BARBAD (+140bps on average) was the worst performing credit since our last publication. Sellers appeared close to the
end of 2017 and the market continues to digest the flow. Moreover, with not a date set for the election, uncertainty has
increased, as the market remains concerned about future fiscal adjustment measures.
PANAMA and DOMREP widened +59bps and +49bps on average during the last quarter. DOMREP positive
developments dried up in 2017 in tandem with the deceleration in growth. Moreover, in February, the Dominican Republic
issued a US$1bln 30Y bond at 6.5% supporting the widening of the curve as concessions were built in before the
announcement. In the case of Panama, growth has remained, supported by the external side of the economy, while
consumption remains sluggish. The absence of significant positive news in the pipeline, in our opinion, and its high cost
relative to other credits in the region has worked against the credit. In the case of JAMAN, not much changed over the last
quarter – local buying endures, although not as robust as earlier in 2017, while the country continues to comply with the
IMF guidelines.
After a volatile start to the year, COSTAR gained some ground in March as the government approved the fast-track route
for the much awaited VAT and Income tax bills, and Fabricio Alvarado (PRN) appointed a market friendly economic team.
Nevertheless, given the volatility experienced in the two weeks prior to the first round election, we remain cautious about
the credit in the short-term. We recognize that the fiscal situation has slightly improved, however, further fiscal
adjustments on the expenditure side remain to be seen. We could get a clearer picture on the magnitude and pace of
further adjustments close to the end of H1 2018. Of course any signals of having enough votes to proceed with
fast-tracking expenditure measures would provide support for the COSTAR curve. For now, the PRN and PLN together
with 31 votes would have to negotiate another 7 votes to show some advancement on this front.
With the approval of the 2018 budget and the positive outcome of the legislative elections on March 4, we expect ELSALV
bonds’ positive trend to continue as the market interprets ARENA’s victory and the FMLN losing its veto power as a sign
of improving government effectiveness going into 2018. If momentum carries into next year, ARENA is likely to be the first
government since the civil war that could bypass any opposition veto. Nevertheless, the extension of the short-term
positive environment would depend on the odds of the FMLN making a comeback and the IMF Article IV review to be
released late in March. For more details please refer to our El Salvador – 2018 Legislative elections note published on
March 7.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 3

 Bahamas: Latest statistics from the Bahamas Department of Statistics imply that economic activity remained mixed
during 2017. Declines in both air arrivals (down 4.0% y/y) and sea arrivals (down 1.5% y/y) reduced total tourist
arrivals 2.1% y/y during 2017, as closures of airports during the passage of Hurricane Irma reduced total arrivals
34.9% y/y during September 2017. Indicators of current construction output suggest greater activity during the first
three quarters of 2017. The value of construction starts surged 62.4% y/y as the values of residential, and
commercial and industrial starts advanced 21.4% y/y and 33.9% y/y while the public sector started projects worth
US$29.4 mln compared to US$0.2 mln one year earlier. On the fiscal front, having recorded a much larger deficit
during its fiscal year ended June 2017 (up 87.6% y/y to US$669.3 mln or approximately 5.8% of GDP), recent data
released by the Central Bank of the Bahamas suggest that the government reduced its overall fiscal deficit by 36.0%
y/y to US$195.6 mln during July to December 2017. The IMF expects that the Bahamian economy will likely grow by
2.5% in 2018 and the fiscal deficit to land at 3.7% of GDP during 2017/18, as lower spending on post-hurricane
reconstruction and rebounds in revenue collected improve the fiscal balance.
 Barbados: The Central Bank of Barbados (CBB) estimates that economic growth slowed down during 2017. Real
GDP expanded 1.0% y/y during 2017 compared to 2.2% during H1 2017 and 1.8% during 2016. Growth in tourism
value added slowed from 4.8% y/y in 2016 to 1.2% y/y in 2017. Greater tax collections and a sharp cut to capital
expenditure and net lending reduced the government’s overall fiscal deficit by 33.0% y/y to US$199.8 mln (about
5.7% of April to December nominal GDP) during April – December 2017. Gross central government debt to GDP
advanced 2.1% y/y to US$6.82blnln (145.9% of GDP) between Q4 2016 and Q4 2017. Both the CBB and the IMF
expect that the slowdown in economic activity during 2017 will likely continue into 2018. The IMF expects economic
growth to reach just 0.5%, as the effects of fiscal consolidation continue to suppress domestic demand.
 Bermuda: Latest official statistics from the Government of Bermuda suggest that real GDP expanded between
0.75% and 1.25% during 2017. Total tourist arrivals increased 7.2% y/y during 2017. Arrivals by air and cruise
advanced 10.3% y/y and 5.1% y/y, while the number of passengers arriving by yacht surged 30.8% y/y as Bermuda
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hosted the 35 America’s Cup. Over the six months ended September 2017, the government’s nominal fiscal deficit
declined to US$63.4mln from a deficit of US$100.2mln over the same period one year prior. Gross government debt
remained relatively stable at US$2.5bln between March 2017 and September 2017. The Government of Bermuda
projects that real GDP will likely expand between 1.5% and 2.0% y/y during 2018. Greater economic activity will likely
benefit from greater investment in on-going projects, persistent growth in tourism and on-going demand for financial
services.
 Costa Rica: 2017 GDP growth came in at 3.2% y/y, decelerating from the 4.2% posted in 2016 and 0.6 p.p. below
the Banco Central of Costa Rica’s estimates in July 2017. The deceleration in growth was driven by the decline in
private investments, especially construction, increases in the overnight rate, and exchange rate fluctuations. On the
fiscal front, Costa Rica’s Congress approved fast-tracking the revenues (VAT, Income Tax) and expenditure bills
(salaries and fiscal rule) on February 28. The government expects Congress to approve the long-debated bills before
the end of the current legislative cycle (April 30). Moreover, Fabricio Alvarado’s appointment of a market friendly
economic team ignited some optimism following the first-round election. Latest polls suggest a technical tie between
Fabricio Alvarado (PRN) and Carlos Alvarado (PAC). However, given F. Alvarado’s recent economic team
appointment and the anti-corruption sentiment in the air, we expect Fabricio Alvarado to maintain a slight edge going
forward.
 Dominican Republic: In line with our expectations, 2017 GDP came in at 4.6% as economic activity growth
increased 5.0% y/y, 6.5% y/y, and 7.4% in October, November and December, respectively, according to the
preliminary results published by the Banco Central Republica Dominicana (BCRD). Non-Financial Public Sector
(NFPS) fiscal revenues excluding donations increased 10.5% to DOP 537.2mln. Total expenditures reached DOP
651mln, increasing 12.2%. As expected, with the slowdown in economic growth, the reconstruction efforts following
natural disasters during the year, and the construction of the Punta Catalina project, the NFPS nominal deficit
reached 3.2% of GDP. IMF’s latest Article IV statement highlighted the good performance of the Dominican economy
despite the deceleration due to external factors (i.e. weather). It also projects 2018 growth quickening to 5.5%, driven
by reinvigorated credit growth and benign external conditions. Although the overall picture on growth is favourable in
the statement, the IMF mentioned higher oil prices, tighter-than-anticipated global financial conditions, and
weaker-than-expected projected external demand as the main downside risks.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 4

 El Salvador: Q3 2017 GDP growth came in at 2.37% y/y, up from the 2.25% y/y increase posted in Q2, but down
from Q2 2016’s 2.39% y/y. More recent data point to a continuation of this trend with total economic activity coming in
at 3.09% y/y, 3.19% y/y, and 3.26% y/y in October, November, and December, respectively. On the fiscal front, the
numbers released by the Central Bank of El Salvador indicate that the NFPS revenue (including donations) reached
US$5.9bln in 2017. On the other hand, NFPS expenses increased 3.5%, reaching US$5.96bln in 2017. With these
numbers, the 12-month central government nominal deficit came in at US$71.86mln (-0.26% of GDP), improving
from the US$230mln deficit (-0.86% of GDP) posted in 2016. The 12-month primary surplus came in at US$727.9mln
(2.67% of GDP), up from the US$474.85mln (1.77% of GDP) surplus posted in 2016. A positive outlook for the El
Salvador economy has started to shape up in 2018. The approval of the 2018 budget, ARENA’s victory in the
legislative election, and still healthy levels of remittances and exports growth should improve confidence indicators in
the country. We have updated our GDP forecast to 2.5% for 2018.
 Jamaica: The Planning Institute of Jamaica estimated that greater output in the goods-producing and services
sectors expanded real GDP 1.1% y/y during Q4 2017. For the entire calendar year, economic activity increased by
0.5% y/y over the period. Faster growth in revenue than expenditure reduced the overall fiscal deficit by 88.6% y/y to
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US$26.0mln during April 2017 to January 2018. On January 31 2018, Fitch Ratings affirmed the Government of
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Jamaica’s ‘B’ rating on its sovereign debt and revised the outlook from stable to positive. Further, on March 9 2018,
the IMF announced the completion of the third review under Jamaica’s Stand-By Arrangement. The IMF highlighted
that the government achieved progress on macroeconomic policies and outcomes, but economic growth and
progress on social outcomes have been weak. The IMF projected that real GDP will increase by 1.9% y/y during
2018/19.
 Panama: Q4 2017 GDP increased 4.9% y/y, decelerating from the 6.1%, 5.25%, and 5.36% growth rates of Q1, Q2,
and Q3. With this number, 2017 growth landed at 5.4%, 0.4 percentage points (p.p.) above the 5.0% posted in 2016.
On the fiscal front, central government revenue came in at US$8.6bln (up 11.5%). Tax revenue increased 1.6% to
US$5.7bln, while central government total expenses reached US$10.4bln, increasing 5.1%. The nominal NFPS
deficit came in at US$1bln or 1.7% of GDP, improving from the 1.9% deficit posted in 2016. The country recorded a
primary surplus of US$75mln or 0.1% of GDP. Looking at the adjusted balance (transfer from the Canal of Panama),
the NFPS posted an adjusted nominal deficit of 1.0%. We maintain our 5.6% forecast for economic growth for 2018
with an upward bias. This is based on the continuous positive contribution of activities along the Canal, the
development of high-income tourist facilities, the expansion of the energy sector and increasing exports.
 Suriname: Preliminary data from the Centrale Bank van Suriname suggest that net external demand and
domestically-financed investment likely improved in 2017. A US$480.0mln improvement in the balance of goods
traded reversed the balance on the external current account from a US$144.8mln deficit over the three quarters
ended Q3 2016 to a US$258.2mln surplus over the same period a year later. Strong growth in public sector capital
expenditure over the first eight months of 2017 (up 111.9% y/y) and a 2.9% y/y expansion in total retail and
commercial mortgages over the twelve months ended December 2017 offset a US$261.4mln y/y decline in foreign
direct investment over the first three quarters of 2017. After placing the government of Suriname’s B1 rating on
review for downgrade, Moody’s then downgraded the country’s rating to B2 with a negative outlook. Moody’s cited
the deteriorating fiscal position as the main reason for its rating action.
 Trinidad and Tobago: Recent estimates from the Central Bank of Trinidad and Tobago (CBTT) suggest that energy
output rebounded 13.5% y/y during Q3 2017, while the decline in non-energy production slowed to just 1.9% y/y over
the same period. Since then, preliminary data suggest that while energy production improved y/y during 2017,
non-energy output may have bottomed out during the year. Greater current energy and non-energy revenue
combined with lower current and capital expenditure narrowed the government fiscal deficit from US$373.5mln
during October – December 2016 to US$33.7mln over the same period a year later. The Central Bank of Trinidad
and Tobago projects that real GDP will likely benefit from stronger energy and non-energy performances during
2018. Energy production should benefit from greater natural gas production and greater average oil prices relative to
one year earlier, while stronger energy output and increased demand for manufactured imports from the rest of the
Caribbean Community (CARICOM) should lift non-energy sector output in the near-term.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 5

Chart 1 Chart 2
High Yield - 10Y Against Benchmark Investment Grade - 10Y Against Benchmark

1370 bps 390 bps PANAMA ARUBA BAHAMA


DOMREP BARBAD
COSTAR JAMAN 340 BERMUD TRITOB
1170
SURINM ELSALV
290
970
240
770
190
570
140
370 90
170 40
Dec-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Dec-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18
Source: Bloomberg and CIBC Capital Markets – Macro Strategy.
10Y bonds are: COSTAR 4 3/8 04/30/25 BARBAD 7 08/04/22 DOMREP 5.95 01/25/27 JAMAN 6 3/4 04/28/28 ARUBA 4 5/8 09/14/23 BAHAMA 5 3/4 01/16/24 BERMUD 4.854 02/06/24
TRITOB 4 3/8 01/16/24 PANAMA 7 1/8 01/29/26 SURINM 9 ¼ 10/26/26 ELSALV 6 3/8 01/18/27

Chart 3
Caribbean Bonds Change in Yields Since Last Publication (December 4, 2017)

BARBAD 7 08/04/22
BARBAD 7 1/4 12/15/21
COSTAR 9.995 08/01/20
CAYMAN 5.95 11/24/19
SURINM 9 1/4 10/26/26
PANAMA 7 1/8 01/29/26
PANAMA 4 09/22/24
BERMUD 4.854 02/06/24
PANAMA 8 7/8 09/30/27
PANAMA 5.2 01/30/20
PANAMA 3 3/4 03/16/25
BARBAD 6 5/8 12/05/35
DOMREP 5 1/2 01/27/25
BERMUD 5.603 07/20/20
PANAMA 3 7/8 03/17/28
DOMREP 6 7/8 01/29/26
DOMREP 7 1/2 05/06/21
DOMREP 6.6 01/28/24
PANAMA 9 3/8 04/01/29
DOMREP 5 7/8 04/18/24
PANAMA 4.3 04/29/53
PANAMA 4 1/2 05/15/47
DOMREP 7.45 04/30/44
COSTAR 4 3/8 04/30/25
JAMAN 6 3/4 04/28/28
COSTAR 4 1/4 01/26/23
DOMREP 6.85 01/27/45
DOMREP 8 5/8 04/20/27
JAMAN 8 06/24/19
BERMUD 4.138 01/03/23
TRITOB 9 3/4 07/01/20
JAMAN 7 5/8 07/09/25
JAMAN 8 1/2 02/28/36
JAMAN 8 03/15/39
JAMAN 7 7/8 07/28/45
ARUBA 4 5/8 09/14/23
TRITOB 5 7/8 05/17/27
JAMAN 9 1/4 10/17/25
COSTAR 7.158 03/12/45
COSTAR 7 04/04/44
COSTAR 5 5/8 04/30/43
ELSALV 7 5/8 09/21/34
ELSALV 6 3/8 01/18/27
BAHAMA 5 3/4 01/16/24
BAHAMA 7 1/8 04/02/38
TRITOB 4 3/8 01/16/24
ELSALV 7 5/8 02/01/41
ELSALV 7.65 06/15/35
BAHAMA 6 5/8 05/15/33
ELSALV 8 5/8 02/28/29
ELSALV 5 7/8 01/30/25
BAHAMA 6.95 11/20/29
ELSALV 7 3/8 12/01/19
ELSALV 7 3/4 01/24/23
-100 -50 0 50 100 150 200

Source: Bloomberg and CIBC Capital Markets – Macro Strategy

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 6

Chart 4 Chart 5
Caribbean – Investment Grade Caribbean – High Yield
14 YTM
7 YTM BAHAMA '38
BAHAMA' 33
12
6 BARBAD '22
BARBAD '21
BAHAMA '29 10 BARBAD '35
5 BAHAMA '24 SURINM '26
TRITOB '27 8
DOMREP '45
4 ARUBA '23 TRITOB '24 DOMREP DOMREP '44
BERMUD '27 JAMAN '45
BERMUD '24 6 DOMREP '21 DOMREP 4/20/27DOMREP
1/25/27 JAMAN '39
BERMUD '23 1/28/24 DOMREP '26 JAMAN '36
3 TRITOB '20 '20 DOMREP '25
BERMUD 4 JAMAN '19 DOMREP JAMAN
4/18/24JAMAN10/17/25
7/9/25
Modified Duration Modified Duration
2 2
2 3 4 5 6 7 8 9 10 11 0 2 4 6 8 10 12 14

Source: Bloomberg and CIBC Capital Markets – Macro Strategy Source: Bloomberg and CIBC Capital Markets – Macro Strategy

Chart 6 Chart 7
Central America – Panama and Costa Rica BARBAD ‘21s vs. DOMREP ‘21s and JAMAN ’25s

YTM 1200
8 BARBAD '21s - DOMREP '21s
ELSALV '35
7 ELSALV '29 ELSALV '41
COSTAR '44 1000 BARBAD '21s - JAMAN '25s
ELSALV '34 COSTAR '45
6 ELSALV '23 ELSALV '27 COSTAR '43
ELSALV '25 800
COSTAR '20 '19 COSTAR '25
5 ELSALV
COSTAR'27
'23 PANAMA '47
PANAMA PANAMA '29
4 PANAMA '28 PANAMA '53 600
PANAMA '26
3 PANAMA '25
PANAMA '24 400
2 PANAMA
01/30/20 200
1
Modified Duration
0 0
0 5 10 15 20 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18

Source: Bloomberg and CIBC Capital Markets – Macro Strategy Source: Bloomberg and CIBC Capital Markets – Macro Strategy

Chart 8 Chart 9
COSTAR ‘44s vs. DOMREP ‘44s PANAMA ‘24s vs. BAHAMA ‘24s and BERMUD ‘24s
140 4.0 0
120 Spread 3.0
100 -50
Z-Score (RHS)
80 2.0
-100 PANAMA '24s - BAHAMA '24s
60 1.0
37.2 PANAMA '24s - BERMUD '24s
40 -150
20 0.0
-0.72
0 -200
-1.0
-20
-2.0 -250
-40
-60 -3.0 -300
Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18

Source: Bloomberg and CIBC Capital Markets – Macro Strategy Source: Bloomberg and CIBC Capital Markets – Macro Strategy

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 7

Table 1
Public Sector Fiscal Accounts and Debt 2017/18

Primary/Adjusted Nominal Gross Government Net Public Sector Real


2017/18 Balance Balance Debt Debt GDP Growth
% of GDP % of GDP % of GDP % of GDP % of GDP
Antigua and Barbuda 0.3% -2.4% 82.8% NA 5.8%
Aruba 3.1% -1.5% 70.0% 28.2% 1.5%
The Bahamas -0.6% -3.7% 73.3% 69.3% 2.5%
Barbados 3.7% -4.1% 128.7% 116.6% 0.5%
Belize 3.1% 0.1% 95.3% 90.9% 2.5%
Bermuda -0.1% -2.1% 42.9% -6.4% 0.9%
Cayman Islands 2.4% 1.5% 16.7% NA 2.2%
Costa Rica -3.5% 7.0% 52.0% 45.3% 3.2%
Dominica 0.3% -1.5% 69.5% n.a. 10.6%
Dominican Republic -0.12 -2.7% 40.0% 38.5% 5.0%
El Salvador 0.1% -2.4% 65% 63.5% 2.5%
Grenada 4.3% 2.4% 64.8% n.a. 2.3%
Jamaica 7.0% -0.3% 113.4% 109.8% 1.6%
Panama -0.5% -1.2% 39% 18.0% 5.6%
St. Kitts and Nevis 0.3% -1.3% 59.0% n.a. 3.5%
St. Lucia 2.1% -1.5% 65.7% n.a. 2.8%
St. Vincent and the Grenadines 0.5% -2.0% 78.5% 74.3% 2.1%
Suriname -2.2% -4.9% 66.1% 62.2% 1.2%
Trinidad and Tobago -9.7% -13.0% 79.6% 31.1% 1.9%
Sources: IMF, Bloomberg, CIBC Capital Markets - Macro Strategy, Cayman Islands' Economics and Statistics Office (ESO), Standard and Poor's.
NA: Not available.
Table 2
Ratings of Caribbean Sovereigns

Ratings Key
2017 Ratings 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 CCC+ Caa3 AA Aa2 BB- Ba3
Bermuda A+ A2 AA- Aa3 B B2
Cayman NA Aa3 A+ A1 B- B3
Costa Rica BB- Ba2 A A2 CCC+ Caa1
Dominican Republic BB- Ba3 A- A3 CCC Caa2
El Salvador CCC+ B3 BBB+ Baa1 CCC- Caa3
Jamaica B B3 BBB Baa2 CC Ca
Panama BBB Baa2 BBB- Baa3 C C
Suriname B B2 D
Trinidad and Tobago BBB+ Ba1
*-: On review for downgrade

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 8

Table 3
Caribbean Bonds and Indicative Prices/Spreads (As of March 20, 2018)
Aruba
Bond Price Yield 3m Yield Change Z-Spread S&P Moody's Fitch
ARUBA 4 5/8 09/14/23 104.28 3.75% 23.63 67.16 BBB+ NR BBB-
Bahamas
Bond Price Yield 3m Yield Change Z-Spread S&P Moody's Fitch
BAHAMA 5 3/4 01/16/24 104.00 4.95% -1.71 208.48 BB+ Baa3 NR
BAHAMA 6.95 11/20/29 110.26 5.73% -19.82 275.44 BB+ Baa3 NR
BAHAMA 6 5/8 05/15/33 104.05 6.21% -13.19 317.67 BB+ Baa3 NR
BAHAMA 7 1/8 04/02/38 104.78 6.69% -2.01 363.38 BB+ Baa3 NR
Barbados
Bond Price Yield 3m Yield Change Z-Spread S&P Moody's Fitch
BARBAD 7 1/4 12/15/21 87.33 11.52% 178.06 843.57 CCC+ Caa3 NR
BARBAD 7 08/04/22 84.23 11.71% 180.35 885.86 CCC+ NA NR
BARBAD 6 5/8 12/05/35 74.55 9.65% 62.91 651.04 CCC+ Caa3 NR
Bermuda
Bond Price Yield 3m Yield Change Z-Spread S&P Moody's Fitch
BERMUD 5.603 07/20/20 106.08 2.88% 58.49 15.77 A+ A2 WD
BERMUD 4.138 01/03/23 103.67 3.30% 34.22 42.81 A+ A2 WD
BERMUD 4.854 02/06/24 105.66 3.77% 66.19 88.06 A+ A2 WD
BERMUD 3.717 01/25/27 97.77 4.02% 52.01 107.84 A+ A2 NA
Cayman Islands
Bond Price Yield 3m Yield Change Z-Spread S&P Moody's Fitch
CAYMAN 5.95 11/24/19 105.34 2.66% 73.88 -10.41 NR Aa3 NR
Costa Rica
Bond Price Yield 3m Yield Change Z-Spread S&P Moody's Fitch
COSTAR 9.995 08/01/20 112.14 4.50% 94.34 169.45 BB- Ba2 NR
COSTAR 4 1/4 01/26/23 96.64 5.04% 39.69 218.02 BB- Ba2 BB
COSTAR 4 3/8 04/30/25 94.75 5.27% 43.39 236.81 BB- Ba2 BB
COSTAR 5 5/8 04/30/43 89.88 6.44% 5.72 345.06 BB- Ba2 BB
COSTAR 7 04/04/44 103.04 6.75% 11.81 376.76 BB- Ba2 BB
COSTAR 7.158 03/12/45 104.34 6.80% 15.41 381.43 BB- Ba2 BB
Dominican Republic
Bond Price Yield 3m Yield Change Z-Spread S&P Moody's Fitch
DOMREP 7 1/2 05/06/21 106.98 5.05% 53.77 134.02 BB- Ba3 BB-
DOMREP 5 7/8 04/18/24 105.17 4.88% 50.10 184.89 BB- Ba3 BB-
DOMREP 6.6 01/28/24 108.92 4.83% 53.56 194.93 BB- Ba3 BB-
DOMREP 5 1/2 01/27/25 102.32 5.09% 61.30 220.18 BB- Ba3 BB-
DOMREP 6 7/8 01/29/26 110.60 5.21% 57.06 230.61 BB- NA BB-
DOMREP 5.95 01/25/27 104.97 5.24% 44.19 231.86 BB- Ba3 BB-
DOMREP 8 5/8 04/20/27 118.30 5.98% 37.21 284.12 BB- Ba3 BB-
DOMREP 7.45 04/30/44 113.19 6.40% 43.98 341.15 BB- Ba3 BB-
DOMREP 6.85 01/27/45 107.05 6.30% 39.01 331.28 BB- Ba3 BB-
DOMREP 6 1/2 02/15/48 103.10 6.27% NA 328.90 BB- Ba3 BB-
El Salvador
Bond Price Yield 3m Yield Change Z-Spread S&P Moody's Fitch
ELSALV 7 3/8 12/01/19 105.21 4.15% -34.84 147.73 CCC+ B3 B-u
ELSALV 7 3/4 01/24/23 110.06 5.36% -44.98 250.02 CCC+ B3 B-u
ELSALV 5 7/8 01/30/25 100.01 5.87% -19.27 299.87 CCC+ B3 B-u
ELSALV 6 3/8 01/18/27 100.06 6.37% 2.40 342.93 CCC+ B3 B-u
ELSALV 8 5/8 02/28/29 116.25 6.52% -18.32 359.61 CCC+ B3 NA
ELSALV 7 5/8 09/21/34 107.49 6.86% 3.67 379.23 CCC+ B3 B-u
ELSALV 7.65 06/15/35 106.65 6.98% -8.80 399.14 CCC+ B3 B-u
ELSALV 7 5/8 02/01/41 106.65 7.03% -7.92 402.34 CCC+ B3 B-u
Jamaica
Bond Price Yield 3m Yield Change Z-Spread S&P Moody's Fitch
JAMAN 8 06/24/19 104.16 4.54% 36.17 -42.99 B B3 Bu
JAMAN 7 5/8 07/09/25 117.69 4.73% 27.30 149.46 B B3 Bu
JAMAN 9 1/4 10/17/25 129.99 4.53% 15.83 156.98 B B3 Bu
JAMAN 6 3/4 04/28/28 111.59 5.26% 40.21 223.02 B B3 Bu
JAMAN 8 1/2 02/28/36 123.99 6.26% 25.72 327.76 B B3 Bu
JAMAN 8 03/15/39 120.47 6.24% 25.05 322.13 B B3 Bu
JAMAN 7 7/8 07/28/45 119.82 6.34% 24.29 336.32 B B3 Bu

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 9

Panama
Bond Price Yield 3m Yield Change Z-Spread S&P Moody's Fitch
PANAMA 5.2 01/30/20 104.37 2.77% 64.48 13.40 BBB Baa2 BBB
PANAMA 4 09/22/24 102.53 3.56% 69.34 65.06 BBB Baa2 BBB
PANAMA 3 3/4 03/16/25 100.57 3.66% 64.39 76.25 BBB Baa2 BBB
PANAMA 7 1/8 01/29/26 122.81 3.74% 70.53 85.34 BBB Baa2 BBB
PANAMA 8 7/8 09/30/27 138.56 3.97% 65.50 104.86 BBB Baa2 BBB
PANAMA 3 7/8 03/17/28 100.13 3.86% 57.76 93.36 BBB Baa2 BBB
PANAMA 9 3/8 04/01/29 145.40 4.19% 51.07 125.21 BBB Baa2 BBB
PANAMA 6.7 01/26/36 125.69 4.58% 57.23 151.75 BBB Baa2 BBB
PANAMA 4 1/2 05/15/47 100.66 4.46% 44.51 147.00 BBB Baa2 BBB
PANAMA 4.3 04/29/53 96.50 4.50% 48.63 152.74 BBB Baa2 BBB
Suriname
Bond Price Yield 3m Yield Change Z-Spread S&P Moody's Fitch
SURINM 9 1/4 10/26/26 103.39 8.68% 73.43 575.55 B B2 NR
Trinidad and Tobago
Bond Price Yield 3m Yield Change Z-Spread S&P Moody's Fitch
TRITOB 9 3/4 07/01/20 115.41 2.72% 29.96 -11.79 BBB+ Ba1 NR
TRITOB 5 7/8 05/17/27 110.27 4.49% 19.08 152.03 BBB+ Ba1 NR
TRITOB 4 3/8 01/16/24 102.88 3.82% -3.27 92.16 BBB+ Ba1 NR
Source: Bloomberg and CIBC Capital Markets – Macro Strategy

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 10

Caribbean Economic Review

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 11

Caribbean Economic Review Shane Lowe


CIBC FirstCaribbean
In the IMF’s latest World Economic Outlook issue of January 2018, it points to a significant y/y acceleration in world
economic expansion during 2017, as 120 economies experienced some acceleration in growth over the period. Faster
growth in advanced economies (up from 1.7% in 2016 to 2.3% in 2017) and emerging and developing markets (up from
4.4% to 4.7%) pushed real GDP growth 0.5 percentage points higher to 3.7%. Specifically, economic growth accelerated
in two of the Caribbean’s three major trading partners, as activity in the United States of America (USA), and Canada
increased by 2.3% y/y and 3.0% y/y compared to 1.5% and 1.4% in 2016, while growth remained relatively stable in the
United Kingdom (UK), falling 0.2 percentage points y/y to 1.7%. Meanwhile, the prospects of stronger global economic
growth, adverse weather in the USA during the latter half of the year, ongoing geopolitical tensions in the Middle East, and
OPEC’s agreement to extend its cuts to oil production, pushed global crude oil prices 23.1% higher y/y in 2017. However,
economic activity remains weak in Venezuela, one of the southern Caribbean’s major trading partners.
Nonetheless, despite stronger global growth, economic growth in the Caribbean in 2017 appeared to have slowed. The
effects of Hurricanes Irma and Maria – two category 5 hurricanes that impacted the region during September 2017 –
curtailed economic activity in the northern Caribbean, while arrivals from Venezuela and the UK have yet to rebound in
those markets most heavily dependent on those countries for their source of tourism. Further, ongoing fiscal consolidation
in some markets has restricted faster economic expansion. Available data suggest that while economic activity expanded
in just over half of the region’s markets during 2017, growth decelerated or remained weak in many instances. Latest
estimates suggest that stay-over tourist arrivals declined by at least 0.2% y/y during the first three quarters of 2017,
compared to a 2.5% y/y expansion over the same period one year prior. Stay-over arrivals declined across most markets,
with arrivals from the Bahamas, Aruba, and Curaçao – which together accounted for approximately 35% of our sample’s
arrivals in 2016 – suffering from the effects of hurricanes (in the case of the Bahamas) and fewer visitors from Venezuela
(in the case of the latter two markets). Further, since then, the effects of Hurricanes Irma and Maria likely substantially
reduced arrivals to Anguilla, the British Virgin Islands, Dominica, and Sint Maarten during Q4 2017. In the rest of the
Eastern Caribbean, arrivals from the UK to Barbados and the Organisation of Eastern Caribbean States (OECS) –
markets that rely heavily on British tourists – fell 0.1% y/y during 2017 and 1.5% y/y year-to-date Q3 2017. Construction
value added benefited from greater private sector activity across the region as government capital expenditure fell in just
under half of our markets. Finally, rising commodity prices and/or a rebound in agriculture/energy production have
generally supported more favourable economic outcomes in commodity-producing markets.

Chart 1 Chart 2
Trends in Regional1 Tourist Arrivals Regional2 Loan Growth (y/y; %)
9 12-mth moving Total Stay-Over Arrivals (R) (mln) 20
8 average Mortgages
Growth in Tourist Arrivals (L)
7 growth (%) 15 Corporate Loans
6 Consumer Loans
5 10
4
3 5
2
1 0
0
-1 -5
-2
-3 -10
Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17

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.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 12

Government fiscal balances worsened in half of the region’s markets in 2017, as greater current spending generally more
than offset additional revenues collected. Just four of eighteen markets – Anguilla, the Cayman Islands, Grenada and St.
Kitts and Nevis recorded fiscal surpluses, and thus, public debt increased across most markets during the period.
Specifically, the countries of the Northern OECS who depend heavily on Citizenship-by-Investment inflows – Antigua and
Barbuda, Dominica, and St. Kitts and Nevis – suffered from lower non-tax revenues from that source, while a US$45.5
mln award against the Government of Belize for the Belize Bank Limited by the Caribbean Court of Justice increased
capital transfers and net lending and reversed a previously-positive improvement in their fiscal balance.
Global commodity prices increased and pushed regional consumer prices higher during 2017. Excluding Suriname where
volatile exchange rate fluctuations fed through to prices over the last two years, average inflation reached 1.3% y/y at
September 2017 compared to 0.5% y/y one year earlier. Most recent data suggest that inflation accelerated across most
of the region, with inflation falling significantly only in Trinidad and Tobago, where domestic demand remains weak.
Further, growth in foreign exchange (FX) reserves in net commodity importers has generally slowed with reserve
expansion limited primarily to the OECS, Curacao and Sint Maarten, Jamaica and the Bahamas. Issuance of external
debt in the latter two markets aided to offset the effects of greater energy prices on imports. Meanwhile, FX reserves
continue to trend upward in Suriname, but have not reversed their downward trend in Trinidad and Tobago.
No loan growth and an acceleration in deposit growth further increased excess liquidity y/y during Q3 2017. Domestic
deposits increased 5.3% y/y, up from 1.8% y/y a year earlier, while loans and advances remained unchanged after
increasing 0.9% y/y in Q3 2016. Retail loans advanced 2.5% y/y, but corporate lending shrank 2.7% y/y. Non-performing
loans, particularly in the larger markets, continued to decline, while regulatory capital as a ratio of risk-weighted assets
remains above globally-accepted minimums.
Having accelerated during 2017, the IMF expects that real global economic growth will accelerate again to 3.9% y/y in
2018, up from 3.7% y/y in 2017. Advanced economies will likely expand once more by 2.3% y/y as faster growth in the
USA (up to 2.7% y/y) offsets decelerated expansions in the UK (1.5%) and Canada (2.3%). Specifically, assuming no
commensurate spending cuts, the USA will likely benefit from the reduction in corporate tax rates and allowances for full
expensing of investment. Meanwhile, led by faster expansions in India, Sub-Saharan Africa, and the Middle East, North
Africa, Afghanistan and Pakistan, economic growth in emerging markets will likely accelerate to 4.9% y/y. Further, the IMF
expects that average oil prices will likely increase 11.7% y/y during 2018. Consequently, faster US expansion should aid
in accelerating economic growth in those Caribbean markets heavily dependent on US tourists, while still-modest growth
in UK GDP may limit growth in visitors from that market. Further, while those markets impacted by Hurricanes Irma and
Maria will likely continue to attract fewer tourists, construction activity associated with rebuilding and rehabilitation should
offset the effects of weaker tourism, particularly in less-tourism dependent Dominica. Finally, commodity producers will
likely benefit from greater global economic expansion and higher oil prices, thus positioned to enjoy improved growth
prospects in 2018.
Chart 3
Regional3 Inflation and Intl. Commodity Prices (%; end of period)
5 90
Regional Inflation Rate (L)
Growth in International Oil Prices* (R) 70
4
Growth in International Food Prices+ (R) 50
3
30
2 10
-10
1
-30
0
-50
-1 -70
Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17

Source: Regional authorities, International Monetary Fund and CIBC FirstCaribbean.


* Average of U.K. Brent, Dubai and West Texas Intermediate + International Monetary Fund Food Index.

3Caribbean 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.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 13

Anguilla Shane Lowe


CIBC FirstCaribbean
Production, Prices, and Employment
Positive growth in tourism and financial intermediation pushed real GDP higher y/y during the first three quarters of 2017.
 Tourism activity benefited from greater stay-over arrivals and excursionists. Stay-over arrivals increased 0.5% y/y.
Despite a 21.8% y/y contraction in the number of Caribbean visitors, as arrivals from the USA, Canada, the UK,
and other markets increased 4.9% y/y, 4.2% y/y, 23.4% y/y, and 2.2% y/y. Additionally, the number of
th
excursionists advanced 7.1% y/y. However, Hurricane Irma’s passage on September 6 2017 significantly
reduced tourist arrivals to Anguilla during September. The number of stay-over arrivals and excursionists declined
57.4% y/y and 94.1% y/y during September 2017.
 Greater financial intermediation output benefited from a 5.2% year-to-date increase in commercial bank loans
during the first nine months of 2017. In contrast, available indicators suggest that construction value added likely
declined y/y during the first three quarters of 2017. The number of approved building permits declined 15.2% y/y
during the first seven months of 2017. However, much greater public capital spending (up 111.9% y/y) and
additional commercial bank lending to construction companies (up 17.5% year-to-date) and to individuals for
home construction and renovation (up 3.5% year-to-date) limited the decline in overall construction GDP.
Consumer prices increased 0.7% y/y at September 2017. The prices of food and non-alcoholic beverages, and
transportation increased 0.6% y/y and 5.4% y/y, but the cost of housing, utilities, gas and fuels declined 1.0% y/y.

Developments in Financial Markets


Rebounds in both retail and corporate lending reversed a persistent downward trend in lending during 2017, but greater
deposit growth increased excess liquidity during the year.
 Higher retail (up 0.8% y/y) and corporate (up 5.9% y/y) loans increased total loans by 3.0% y/y. Lending for
personal mortgages increased 3.6% y/y, but consumer loans fell 1.9% y/y. Similarly, loans to businesses rose
7.6% y/y, but public sector lending contracted 24.0% y/y.
 Total deposits increased 5.9% y/y. Local currency demand and savings deposits increased 25.0% y/y and 8.9%
y/y, but local currency time deposits declined 16.8% y/y. Foreign currency balances advanced 7.5% y/y.
 Thus, the loan-to-deposit ratio contracted 1.5% y/y to 54.1% while greater weighted average lending rates (up 113
bps y/y to 9.90%) and lower deposit rates (down 14 bps y/y to 2.21%) increased the average interest rate spread
by 127 bps y/y.

Chart 1 Chart 2
Stay-Over Tourist Arrivals Inflation (y/y; %)

2,250 (US$/person) (000's) 85 6 All Items


Food
2,200 80 5 Fuel and Light
2,150 75 4
3
2,100 70
2
2,050 65 1
2,000 60 0
Visitor Expenditure/person - 12-month average (L)
-1
1,950 Stay-Over Arrivals (R) 55
-2
1,900 50
Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 -3
2012Q3 2013Q3 2014Q3 2015Q3 2016Q3 2017Q3

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 14

Having declined from 49.3% to 6.5% y/y during 2016 on account of the resolution of two large insolvent banks, the
non-performing loans ratio subsequently surged to 23.5% in Q4 2017. Meanwhile, the annualised return on assets and
the regulatory capital adequacy ratio contracted to 0.1% and 10.4% respectively as at Q4 2017 from 1.1% and 11.8% one
year earlier.
Government Debt
A sharp increase in the value of grants collected boosted the government fiscal surplus from US$0.8 mln during January
to September 2016 to a US$11.7mln surplus one year later.
 Total current revenue increased US$2.9mln y/y to US$56.1mln. Taxes collected expanded US$3.3 mln y/y to
US$48.8mln, but non-tax receipts fell US$0.4mln y/y to US$7.4mln. Taxes on property and taxes on domestic
goods and services rose US$1.1mln (106.3% y/y) and US$5.3 mln (29.8% y/y), but taxes on income and profits
and taxes on international trade and transactions declined US$0.2mln (4.1% y/y) and US$2.9mln (13.1% y/y).
Additionally, total grants received by the government rose US$11.1mln y/y to US$11.3mln.
 Greater spending in all categories except personal emoluments increased current expenditure by US$1.7 mln y/y
to US$53.1mln. Spending on goods and services, interest payments, and transfers and subsidies expanded
US$0.4mln (3.5% y/y), US$1.2mln (37.2% y/y) and US$0.4mln (3.3% y/y), but spending on personal emoluments
declined US$0.3mln (1.4% y/y). Meanwhile, capital expenditure and net lending surged 111.9% y/y to US$2.6mln.
Total public sector debt advanced 8.7% y/y to US$175.2mln (approximately 52.1% of projected 2017 nominal GDP) as at
September 2017, but declined 4.5% since the end of 2016.

Outlook
The damaged inflicted from Hurricane Irma during September 2017 will likely have a material impact on the trajectories of
economic activity and public indebtedness during 2018. The ECCB expects that economic activity likely declined by 3.5%
in 2017, but reconstruction post-Irma and the associated positive knock-on effects to mining and quarrying, and
manufacturing will likely lead to a recovery in real output of 5.9% y/y during 2018. Meanwhile, notwithstanding external
financial assistance to fund reconstruction efforts, a likely fall-off in government revenues and any borrowing to
supplement grant funding will likely worsen the fiscal balance and increase indebtedness during 2018.

Chart 3 Chart 4
Public Sector Debt Outstanding Growth in Key Balances (%)

200 (US$mln) 20
180 10
160
0
140
120 -10
Loans
100 -20
Deposits
80
-30
60
40 -40
20 -50
0
-60
2013Q3 2014Q3 2015Q3 2016Q3 2017Q3
2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 15

Antigua and Barbuda Shane Lowe


CIBC FirstCaribbean
Production, Prices, and Employment
The Eastern Caribbean Central Bank (ECCB) estimates that lower output in tourism slowed economic growth y/y in
Antigua and Barbuda year-to-date through Q3 2017.
 Stronger private sector activity boosted real construction GDP y/y during the review period. Notwithstanding
declines in outstanding commercial bank loans to construction firms (down 9.4% year-to-date) and individuals for
home construction and renovation (down 1.1% year-to-date), greater activity on private sector hotels and
Citizenship-by-Investment projects contributed to a 22.5% y/y surge in construction material imports and a 2.9%
y/y increase in the volume of cement imports. In contrast, the government spent 59.4% less y/y on capital projects
than they did over the same period one year earlier.
 Notwithstanding strong growth in cruise (up 11.8% y/y) and yacht (up 6.2% y/y) passenger arrivals, a 7.1%
decline y/y in stay-over arrivals reduced tourism value added. Stay-over arrivals from the USA, Canada, the UK
and the Caribbean contracted 10.8% y/y, 4.4% y/y, 5.2% y/y, and 9.9% y/y respectively, but the number of visitors
from other markets advanced 4.6% y/y. Overall, total visitor expenditure declined 5.9% y/y over the same period.
However, the influx of cruise arrivals and cruise ship calls (up 19.8% y/y) and the strong performance in
construction benefited developments in transport, storage and communications, as well as in wholesale and retail
trade.
Consumer prices increased 2.8% between September 2016 and September 2017. Prices of food, housing and utilities, as
well as transportation and communications rose 2.7% y/y, 7.4% y/y, and 2.5% y/y respectively.

Developments in Financial Markets


A modest decline in loans and some expansion in deposits pushed liquidity higher y/y during Q4 2017. Except for a
modest reduction in profitability, financial stability indicators improved.
 A 2.5% y/y decline in corporate loans more than offset a 1.9% y/y expansion in retail loans to reduce total loans
by 0.3% y/y. Business loans and mortgages fell 6.8% y/y and 0.2% y/y, but lending to the public sector and
consumers increased 3.5% y/y and 5.6% y/y respectively.
 Despite a 16.7% y/y fall in time deposits, greater demand (up 17.2% y/y), savings (up 8.0% y/y), and foreign
currency (up 19.2% y/y) balances increased total deposits 5.9% y/y.

Chart 1 Chart 2
Stay-Over Tourist Arrivals Inflation (y/y; %)

2,000 (US$/person) Visitor Expenditure/person (L) (000's) 270 5 All Items (L) 10
Food (L)
Stay-Over Arrivals (R) 4
260 Fuel and Light (R) 5
3
1,500 0
250 2
1 -5
240
1,000 0
-10
230 -1
-15
-2
500 220 -3 -20
Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 2012Q3 2013Q3 2014Q3 2015Q3 2016Q3 2017Q3

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 16

 Higher liquidity (as evidenced by a 4.1% percentage point fall y/y in the loan-to-deposit ratio to 65.7%) coincided
with declines in the weighted average interest rates paid on loans (down 10 bps y/y to 9.01%) and deposits (down
6 bps y/y to 1.62%).
 The average return on assets and the ratio of non-performing loans-to-total loans fell from 1.5% and 8.7%
respectively, to 1.4% and 7.9% during Q4 2017; while the regulatory capital adequacy ratio increased 1.6
percentage points to 38.0%.

Government Debt
Declines in tax, non-tax, and capital revenues more than offset declines in current and capital expenditure to widen the
government fiscal deficit by 27.3% y/y to US$20.7 mln during January to September 2017.
 Current revenues contracted US$12.7 mln y/y to US$201.4 mln. Non-tax current revenue primarily associated
with lower Citizenship by Investment inflows declined US$10.2 mln y/y to US$21.2 mln, while tax receipts fell
US$2.5mln y/y to US$180.2 mln. Taxes on income and profits and taxes on international trade and transactions
fell US$1.7 mln (7.5% y/y) and US$4.1 mln (5.9% y/y), respectively, but taxes on property and taxes on domestic
goods and services rose US$1.1 mln (19.2% y/y) and US$2.2 mln (2.5% y/y). Meanwhile, capital revenues
contracted US$11.8mln y/y to US$3.8 mln, but the government received US$0.4 mln in grants compared to none
a year earlier.
 Current expenditures declined US$0.8 mln y/y to US$213.4 mln. Spending on personal emoluments, and
transfers and subsidies shrank US$0.1 mln (0.1% y/y) and US$1.6 mln (2.6% y/y) and more than offset greater
spending on goods and services (up US$0.4 mln y/y) and interest payments (up US$0.5 mln y/y). Capital
expenditures and net lending plunged US$18.9 mln y/y to US$12.9 mln, in line with lower capital revenue.
Between Q3 2016 and Q3 2017, total public sector debt expanded from US$1.11 bln (approximately 76.3% of GDP) to
US$1.15 bln (approximately 75.3% of GDP).

Outlook
After an expected slowdown in real GDP growth to 3.1% during 2017, the ECCB expects real GDP growth to accelerate to
5.8% in 2018. The central bank expects that construction growth will likely accelerate in 2018 and support growth in other
sectors of the economy. Further, the IMF expects that deteriorations in the primary balance will worsen the government’s
fiscal balance again in 2018.

Chart 3 Chart 4
Public Sector Debt Outstanding Growth in Key Balances (%)

1,300 (US$mln) 8 Loans


6 Deposits
1,250
4
1,200
2
1,150 0

1,100 -2
-4
1,050
-6
1,000 -8
2013Q3 2014Q3 2015Q3 2016Q3 2017Q3 2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 17

Aruba Shane Lowe


CIBC FirstCaribbean
Production, Prices, and Employment
Persistent declines in stay-over arrivals from Venezuela continued to limit growth y/y in tourism GDP during 2017, while
available indicators point to greater investment activity y/y during the first three quarters of 2017.
 Available data suggest that tourism GDP increased during 2017, but a persistent weakness in the Venezuelan
source market restricted faster growth over the period. The number of stay-over arrivals and total visitor nights
declined 2.9% y/y and 0.1% y/y, respectively. Stay-over arrivals from North America and Europe increased 10.8%
y/y and 4.8% y/y, respectively, but a 53.8% y/y plunge in the number of visitors from Venezuela reduced the
number of arrivals from Latin America by 32.9% y/y. Arrivals from all other markets declined 19.9% y/y. In
contrast, a 14.7% y/y rise in the number of cruise ship calls boosted total cruise passenger arrivals by 20.8% y/y.
 Meanwhile, strong growth in the value of construction permits (up 141.4% y/y), the number of construction permits
(up 14.2% y/y), and imports of machinery and electro-technical equipment (up 6.3% y/y) suggest greater
investment during Q1 to Q3 2017. Further, strong growth in cruise calls to the harbour and robust construction
activity likely benefited activity in the transport, storage and communications sector, but mixed performances in
water and electricity production imply weak growth y/y in utilities over the first three quarters of 2017. The quantity
of water production fell 1.8% y/y, but the volume of electricity produced rose 1.4% y/y.
Consumer prices fell 0.3% y/y during 2017, after declining by the same magnitude over the same period one year prior.

Developments in Financial Markets


Greater growth in loans than deposits reduced banks’ liquidity during 2017, while capital adequacy and loan quality
improved y/y during Q3 2017.
 Greater growth in corporate and retail loans increased total loans by 3.3% y/y in December 2017. A 4.4% y/y rise
in mortgages eclipsed a 1.6% y/y decline in consumer loans to push total retail loans 2.9% higher y/y.
Additionally, corporate loans increased 4.5% y/y.
 Total deposits increased 0.7% y/y. Demand deposits increased 6.3% y/y, time deposits fell 10.4% y/y while
savings deposits remained stable.
 Consequently, the loan-to-deposit ratio increased 1.9 percentage points y/y to 74.4% in December 2017.
 Further, the capital adequacy ratio increased from 27.4% to 32.3% between Q3 2016 and Q3 2017, and the
non-performing loans to total loans ratio declined 0.6 percentage points y/y to 4.2% over the same period.

Chart 1 Chart 2
Real GDP and Unemployment (%) Growth in Tourist Arrivals and Length of Stay

6 12 1,300 12-month (nights) 9


Tourist Arrivals (L) Length of Stay (R)
4 1,250 rolling
10 000's of
2 1,200 persons
0 8 1,150 8
-2 1,100
-4 6 1,050
-6 1,000
-8 4 7
950
-10 2 900
Real GDP Growth (L)
-12 850
Unemployment Rate (R)
-14 0 800 6
2008 2009 2010 2011 2012 2013 2014 2015 2016 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 18

The central bank’s net foreign assets declined 1.4% y/y to US$921.3 mln (approximately 20.5 weeks of projected 2017
imports of goods and services) during 2017.

Government Debt
During H1 2017, the government’s overall fiscal deficit worsened US$7.7 mln y/y to US$59.8 mln.
 Higher non-tax revenues (up US$8.4 mln y/y) more than offset a US$5.5 mln (1.8% y/y) decline in tax revenues to
push total revenues US$3.0 mln higher y/y to US$339.3 mln. Taxes on commodities, taxes on property, taxes on
services, the turnover tax, and the foreign exchange tax increased US$7.4 mln (10.1% y/y), US$4.0 mln (16.1%
y/y), US$0.2 mln (1.6% y/y), US$3.2 mln (12.3% y/y), and US$0.1 mln (0.4% y/y), respectively. However, taxes
on income and profits contracted US$20.3 mln y/y to US$136.5 mln.
 In contrast, total spending increased US$11.6 mln y/y to US$397.7 mln. Spending on employer’s contribution,
wage subsidies, and transfers to the General Health Insurance fell US$1.8 mln (5.8% y/y), US$9.8 mln (21.8%
y/y), and US$5.0 mln (25.1% y/y), respectively. However, the government spent more on wages (up US$1.9 mln
y/y), goods and services (up US$2.6 mln y/y), interest on debt (up US$0.8 mln y/y), the development fund (up
US$4.8 mln y/y), investment (up US$1.4 mln y/y), and transfers and subsidies (up US$16.8 mln y/y). Finally, net
lending declined US$1.0 mln y/y to US$1.5 mln.
Since then, total revenue declined US$12.5 mln y/y to US$666.0 mln. Tax revenues increased US$7.2 mln y/y to
US$607.7 mln, but non-tax receipts fell US$19.6 mln y/y to US$58.3 mln.
Total government debt increased by 4.4% y/y to US$2.34 bln (86.1% of GDP) during June 2017. The stock of domestic
debt increased 13.5% y/y to US$1.13 bln, but the stock of foreign debt contracted 2.8% y/y to US$1.21 bln.

Outlook
The latest projections from the central bank suggest that, having likely rebounded by 2.6% in 2017, real GDP will likely
increase by 2.7% in 2018. The central bank expects that tourist receipts will likely increase by 2.4% in 2018, while
investment activity should benefit from postponements of investments from 2017 into 2018. These developments in
tourism and investment should aid in boosting private consumption by 2.8% y/y, while inflation should remain modest at
0.3% in 2018.

Chart 3 Chart 4
Inflation (y/y; %) Growth in Key Balances (%)

2.5 12 Loans
All Items
2.0 10 Deposits
1.5 8
1.0 6
0.5 4
0.0 2
-0.5 0
-1.0 -2
-1.5 -4
-2.0 -6
Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 19

The Bahamas Shane Lowe


CIBC FirstCaribbean
Production, Prices, and Employment
Latest statistics from the Bahamas Department of Statistics imply that economic activity remained mixed during 2017.
 Declines in both air arrivals (down 4.0% y/y) and sea arrivals (down 1.5% y/y) reduced total tourist arrivals 2.1%
y/y during 2017, as closures of airports during the passage of Hurricane Irma reduced total arrivals 34.9% y/y
during September 2017. Air arrivals to New Providence and Grand Bahamas fell 3.6% y/y and 43.8% y/y,
respectively, while the number of arrivals by air to the Family Islands rose 14.3% y/y. Meanwhile arrivals by sea to
New Providence and the Family Islands increased 3.2% y/y and 0.8% y/y, respectively, but sea arrivals to Grand
Bahama plunged 23.5% y/y. However, total tourist arrivals rebounded 8.4% y/y during Q4 2017 compared to a
1.7% y/y decline one year earlier when Hurricane Matthew struck the Bahamas. Since then, more air (up 7.0%
y/y) and sea (up 4.6% y/y) arrivals increased total arrivals 5.0% y/y during January 2018.
 Indicators of current construction output suggest greater activity during the first three quarters of 2017. The value
of construction starts surged 62.4% y/y as the values of residential, and commercial and industrial starts
advanced 21.4% y/y and 33.9% y/y, respectively, while the public sector started projects worth US$29.4 mln
compared to US$0.2 mln one year earlier. Similarly, despite declines in the value of commercial and industrial
(down 1.3% y/y), and public sector (down 69.6% y/y) completions, a 38.3% y/y increase in residential completions
lifted total construction completions 20.3% higher y/y. In contrast, the value of construction permits fell 16.2% y/y
and may indicate some slowdown in future construction activity.
The unemployment rate increased 0.2 percentage points to 10.1% between May 2017 and November 2017, but remained
below the 11.6% recorded in November 2016.
Consumer prices increased at a faster pace during 2017 than during 2016. The inflation rate reached 1.8% at December
2017 compared to 0.8% twelve months earlier, as the prices of food and non-alcoholic beverages (up 1.9% y/y), housing,
water, electricity, gas, and other fuels (up 2.9% y/y), and transportation (up 4.9% y/y) all increased at faster rates than one
year prior.

Developments in Financial Markets


During 2017, total banking sector loans and weighted average interest rate spreads declined.
 Total loans and advances contracted 4.1% y/y. The value of mortgages, consumer loans, public sector loans and
business loans fell 0.4% y/y, 2.3% y/y, 12.5% y/y, and 12.8% y/y, respectively.
 Despite higher resident retail (up 0.5% y/y) and corporate (up 2.5% y/y) deposits, a 7.3 y/y fall in non-resident
balances reduced total deposits by 2.3% y/y.
 Weighted average interest rate spreads narrowed 82 bps y/y to 10.37%. The weighted average rate on deposits
declined 18 bps to 1.02%, but weighted average lending rates fell further by 100 bps to 11.39%.

Chart 1 Chart 2
Growth in Tourist Arrivals Inflation (y/y; %)

1,550 12-month 10
rolling Tourist Arrivals All Items Food
1,500 000's of 8
persons 6
1,450
4
1,400 2

1,350 0
-2
1,300
-4
1,250
-6
Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17
Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17
Source: Caribbean Tourism Organization and CIBC FirstCaribbean. Source: Central Bank of the Bahamas and CIBC FirstCaribbean.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 20

Commercial bank private sector loan delinquency declined further in January 2018. The private sector non-performing
loans to total loans ratio fell from 12.4% at January 2017 to 9.8% twelve months later. Alternatively, banks’ excess liquid
assets surged 23.5% y/y to US$1.85 bln.
Having advanced 6.5% during 2017, the Bahamas International Securities Exchange All Share Index declined 0.6%
year-to-date by the end of February 2018.
Substantial external borrowing during Q4 2017 boosted the central banks’ external reserves by 57.3% y/y to US$1.46 bln
(approximately 15.2 weeks of import cover) during January 2018.

Government Debt
Having recorded a much larger deficit during its fiscal year ended June 2017 (up 87.6% y/y to US$669.3 mln or
approximately 5.8% of GDP), recent data released by the Central Bank of the Bahamas suggest that the government
reduced its overall fiscal deficit by 36.0% y/y to US$195.6 mln during July to December 2017.
 Total revenue and grants expanded US$26.7 mln y/y to US$878.5 mln as a US$5.9 mln (6.6% y/y) rise in non-tax
revenue supported a US$20.8 mln (2.7% y/y) expansion in taxes collected. Taxes on international trade and
transactions, and the departure tax fell US$2.3 mln (0.9% y/y) and US$0.4 mln (0.7% y/y), while the Value Added
Tax (VAT) – the single largest source of government revenue – increased US$9.9 mln (3.3% y/y). Property taxes,
business and professional licences, and other taxes rose US$0.6 mln (1.8% y/y), US$5.3 mln (34.3% y/y) and
US$7.8 mln (8.3% y/y).
 Total spending declined US$83.2 mln y/y to US$1.07 bln. Despite greater spending on goods and services (up
US$4.3 mln y/y), personal emoluments (up US$21.0 mln y/y), and interest payments (up US$9.2 mln y/y), a
US$41.1 mln (11.5% y/y) drop in spending on subsidies and other transfers reduced total current expenditure by
US$6.5 mln to US$998.3 mln. Similarly, declines in both capital formation and asset acquisition reduced capital
expenditure by US$76.7 mln y/y to US$75.8 mln.
Total national debt increased 11.8% y/y to US$7.88 bln by December 2017. Total direct debt rose 13.7% y/y to US$7.18
bln, but total contingent liabilities declined 4.1% y/y to US$704.2mln. Of direct debt, total debt denominated in foreign
currency surged 49.8% y/y to US$2.61 bln, as the government successfully raised US$750 mln in foreign financing, but
internal direct debt declined 0.1% y/y to US$4.56 bln.

Outlook
The IMF expects that the Bahamian economy will likely increase by 2.5% in 2018, as stronger growth in US GDP, further
opening of the Baha Mar luxury resort and casino and foreign-financed construction activity accelerate economic growth
relative to 2017. Additionally, the IMF projects that the government will reduce its fiscal deficit to 3.7% of GDP during
2017/18, as lower spending on post-hurricane reconstruction and rebounds in revenue collected improve the fiscal
balance.
Chart 3 Chart 4
Foreign Direct Investment (January–September) Growth in Key Balances (%)

800 (US$mln) 3 20
Land Sales Loan Growth (L) Deposit Growth (R)
700 2 10
Equity
600 1 0
0 -10
500
-1 -20
400
-2 -30
300
-3 -40
200 -4 -50
100 -5 -60
0 -6 -70
2012 2013 2014 2015 2016 2017 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 21

Barbados Shane Lowe


CIBC FirstCaribbean
Production, Prices, and Employment
The Central Bank of Barbados (CBB) estimates that economic growth slowed during 2017. Real GDP expanded 1.0% y/y
during 2017 compared to 2.2% during H1 2017 and 1.8% during 2016.
 Growth in tourism value added slowed from 4.8% y/y in 2016 to 1.2% y/y in 2017. Data from the Barbados
Tourism Marketing Inc. suggest that total stay-over arrivals expanded 5.0% y/y in 2017 compared to 6.7% y/y in
2016 while arrivals via cruise ships surged 14.5% y/y in 2017 relative to a 1.4% rise one year prior. Stay-over
arrivals from the UK – the single largest source market – declined 0.1% y/y, while arrivals from Central and South
America contracted 14.0% y/y. In contrast, arrivals from the USA, Canada, Continental Europe, the Caribbean,
and all other markets expanded 11.7% y/y, 7.9% y/y, 2.3% y/y, 4.1% y/y, and 23.8% y/y, respectively. However, a
5.6% decline in the average length of stay from major markets outside of the Caribbean limited growth in tourism
receipts to just 2.3% y/y.
 Construction value added rose 6.3% y/y, as stronger growth in private sector-related activity more than offset
lower public capital expenditure. However, growth in distribution, finance and other services, and transportation,
storage and communications – which together account for 54% of overall economic activity – slowed to 0.1% y/y,
0.6% y/y and 1.1% y/y in 2017, respectively, from 1.3% y/y, 2.7% y/y and 1.8% y/y one year earlier. Finally, sugar
output rebounded 43.3% y/y, but remained below 2015 levels.
At October 2017, the 12-month moving average consumer price inflation rate increased to 4.0% y/y compared to 0.4%
over the same period one year prior.
The 4-quarter average unemployment rate increased marginally from 10.0% as at Q3 2016 to 10.2% during Q3 2017.

Developments in Financial Markets


Total banking sector loans rebounded 1.1% y/y during 2017 compared to no growth in 2016. Further, declines in retail and
non-resident deposits reduced banking sector liquidity over the same period.
 Despite a 14.4% y/y fall in public sector loans, greater mortgages (up 0.1% y/y), consumer loans (up 3.2% y/y),
and business loans (up 3.3% y/y) balances increased total loans and advances during the year.
 Lower resident (down 0.4% y/y) and non-resident (down 8.2% y/y) deposits reduced total deposits by 0.7% y/y.
Resident retail deposits contracted 2.0% y/y, but corporate balances from residents increased 2.1% y/y.
Notwithstanding greater loan growth and falling deposit balances, both average lending and deposit rates declined by
2 bps y/y and 12 bps y/y to 6.63% and 0.16%, respectively, by the end of November 2017.

Chart 1 Chart 2
Key Economic Indicators (%) Net Long-Term Private Capital Flows
(January-December US$mln)
20 600 Net Long-Term Private Capital Flows
15
500
10
400
5
300
0

-5 200
Real GDP Growth
-10 100
Tourist Arrivals
-15 Unemployment Rate
0
2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4 2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4

Source: Central Bank of Barbados, Barbados Statistical Service, Caribbean Tourism Organization and Source: Central Bank of Barbados and CIBC FirstCaribbean.
CIBC FirstCaribbean.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 22

Major financial stability indicators improved over the first three quarters of 2017. Commercial banks’ capital adequacy ratio
and return on assets increased to 20.1% and 1.1%, respectively, from 19.6% and 1.0% at the end of 2016, while the non-
performing loans to total loans ratio declined from 8.9% to 8.2% over the same period.
The central bank’s foreign exchange reserves continued to trend downward and declined by US$137.0 mln y/y to
US$204.9 mln (6.6 weeks of imports of goods and services) by the end of 2017. The external current account deficit
declined marginally from 4.5% of GDP to 4.4% of GDP between 2016 and 2017, as greater tourism receipts and lower
non-intermediate imports marginally offset greater intermediate imports. However, financial inflows could not finance the
current account deficit as private long-term capital inflows declined for the third consecutive year while government repaid
foreign debt without the commensurate inflow of public borrowing.
Government Debt
Greater tax collections and a sharp cut to capital expenditure and net lending reduced the government overall fiscal deficit
by 33.0% y/y to US$199.8 mln (about 5.7% of April to December nominal GDP) during April – December 2017.
 Greater taxes (up US$99.7 mln y/y) and non-tax revenue and grants (up US$3.6 mln y/y) lifted revenue by
US$103.3 mln y/y to US$968.2 mln. Collections of personal taxes, corporate taxes, property taxes, and the
financial institutions tax increased US$1.0 mln (0.6% y/y), US$17.4 mln (28.8% y/y), US$0.5 mln (0.9% y/y) and
US$6.1 mln (53.7% y/y), respectively, while other direct taxes fell US$9.7 mln (38.4% y/y). Similarly, stamp duties,
VAT, excise taxes and proceeds from the National Social Responsibility Levy rose US$0.2 mln (4.6% y/y),
US$15.0 mln (4.9% y/y), US$33.7 mln (62.2% y/y) and US$42.4 mln (706.7% y/y), respectively, but import duties
and other taxes fell US$4.6 mln (5.5% y/y) and US$2.3 mln (4.9% y/y).
 Current spending rose US$28.0 mln y/y to US$1.11 bln. Outlays on wages and salaries, and goods and services
contracted US$2.3 mln (0.8% y/y) and US$3.4 mln (2.8% y/y), respectively, but interest on debt, and transfers
and subsidies expanded US$8.6 mln (2.9% y/y) and US$25.0 mln (6.6% y/y). Capital expenditure and net lending
shrank 29.1% y/y to US$55.8 mln.
Gross central government debt to GDP advanced 2.1% y/y to US$6.82 bln (145.9% of GDP) between Q4 2016 and Q4
2017. However, higher commercial bank securities reserve requirements and a smaller fiscal deficit led to a reduction in
the CBB’s financing to government from US$357.3 mln during April – December 2016 to US$48.4 mln a year later.

Outlook
Both the CBB and the IMF expect that the slowdown in economic activity during 2017 will likely continue into 2018. The
IMF expects economic growth to reach just 0.5%, as the effects of fiscal consolidation continue to suppress domestic
demand. The IMF also projects that the government’s fiscal deficit will likely fall to 4.1% of GDP during 2017/18, below the
targeted balanced budget the government projected back in May. Finally, the CBB expects that, while inflows associated
with greater tourist arrivals and tourism investment projects will boost foreign exchange receipts, their foreign exchange
reserves will likely continue to come under pressure from ongoing foreign debt service and rising global fuel prices.

Chart 3 Chart 4
Inflation (y/y; %) Developments in Credit Market Indicators (%)

12 All Items (L) 10 20 Loan Growth


10 Food (L) NPLs/Total Loans
16
Fuel and Light (R) 5
8
12
6 0
4 8
2 -5
4
0
-10
-2 0

-4 -15 -4
2012Q3 2013Q3 2014Q3 2015Q3 2016Q3 2017Q3 2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 23

Belize Shane Lowe


CIBC FirstCaribbean
Production, Prices, and Employment
Latest data from the Central Bank of Belize suggest that tourism and agriculture output improved y/y during 2017.
 Data on major domestic exports imply that agriculture GDP increased during the year. The volumes of sugar cane
deliveries and sugar exports increased 13.4% y/y and 22.2% y/y, while exports of molasses, bananas and citrus
deliveries increased 12.6% y/y, 19.9% y/y and 1.4% y/y, respectively. However, the volume of citrus juice exports,
papaya exports and marine exports contracted 1.7% y/y, 53.1% y/y and 13.4% y/y, respectively.
 Tourism value added also expanded during the year. Total stay-over arrivals increased 9.1% y/y to 389,158
persons as arrivals via air, land and sea increased 7.4% y/y, 18.2% y/y and 17.7% y/y, respectively. Similarly, the
number of cruise ship visitors increased 0.9% y/y. In contrast, a 19.8% y/y fall in crude production implies
persistent decline in manufacturing and mining output during the year.
Growth in employment (up 3.9% y/y) and lower unemployment (down 10.6% y/y) reduced the unemployment rate by 1.4
percentage points y/y to 9.7% as at September 2017.
The price of consumer goods and services increased 0.9% y/y in January 2018. The prices of transportation, and housing,
water, fuel and power increased 5.6% y/y and 0.9% y/y, respectively, but the price of food and non-alcoholic beverages
declined 0.2% y/y.

Developments in Financial Markets


Notwithstanding weak growth in banking sector loans, falling deposit balances reduced banking sector liquidity during
2017. However, falling lending and deposit rates reduced interest rate spreads over the same period.
 Total loans and advances increased 0.2% y/y in December 2017. Retail loans increased 1.4% y/y, public sector
loans declined 39.0% y/y, while the stock of business loans remained stable.
 Retail deposits increased 0.4% y/y, but declines in corporate deposits (down 2.4% y/y) and non-resident deposits
(down 2.0% y/y) reduced total deposits 1.3% y/y.
 Moreover, the loan-to-deposit ratio increased 1.1 percentage points y/y to 76.7%. Average interest rate spreads
declined 25 bps y/y to 8.13% as both the weighted average lending and weighted average deposit rates fell 32
bps y/y and 7 bps y/y.
The Central Bank of Belize’s gross official international reserves plunged 17.1% y/y to US$312.1 mln (approximately 14.5
weeks of projected 2017 imports of goods and services) during December 2017.

Chart 1 Chart 2
Key Economic Indicators (%) Inflation (y/y; %)
20 2.5
Real GDP Growth
2.0 All Items
15 Tourist Arrivals
1.5
10
1.0
5 0.5

0 0.0
-0.5
-5
-1.0
-10 -1.5
2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 24

Government Debt
No growth in total revenue and grants received combined with growth in both current and capital expenditure widened the
government fiscal deficit to US$63.5 mln during April to November 2017 from US$29.0 mln over the same period twelve
months earlier.
 Despite higher collections of current revenue (up US$10.3 mln y/y), declines in capital revenue (down US$0.3 mln
y/y) and grants (down US$10.3 mln y/y) reduced total revenue and grants by US$0.2 mln y/y to US$356.0 mln.
Current tax receipts increased US$8.0 mln y/y to US$316.8 mln as greater collections of taxes on income and
profits (up US$0.7 mln y/y), taxes on property (up US$0.2 mln y/y), and taxes on goods and services (up US$12.1
mln y/y) more than offset a US$4.9 mln (8.4% y/y) decline in taxes on international trade and transactions.
Current non-tax receipts increased US$2.3 mln y/y to US$32.8 mln.
 Higher current (up US$14.5 mln y/y) and capital (up US$19.9 mln y/y) expenditure propelled total expenditure
US$34.3 mln higher y/y to US$419.5 mln. Current spending on goods and services fell US$3.9 mln (5.7% y/y), but
outlays on wages and salaries, pensions, interest on debt, and subsidies and other transfers all increased US$7.9
mln (5.9% y/y), US$4.5 mln (16.0% y/y), US$3.8 mln (13.0% y/y), and US$2.3 mln (4.2% y/y). Further,
notwithstanding a US$25.3 mln (36.1% y/y) plunge in development spending-related capital expenditure, a
US$45.5 mln award against the Government of Belize for the Belize Bank Limited by the Caribbean Court of
Justice increased capital transfers and net lending from US$0.9 mln during April – November 2016 to US$46.1
mln one year later.
Public sector debt increased 12.2% y/y to US$1.77 bln (95.2% of GDP) by the end of 2017. External debt increased 4.4%
y/y to US$1.25 bln, and the stock of domestic debt surged 37.3% y/y to US$513.3 mln.

Outlook
The Central Bank of Belize estimates that real GDP will likely expand by between 1.5% and 2.0% in 2018 as agriculture,
fishing and tourism activity expand. Primary sector output will likely expand by 3.8% y/y as sugar cane and shrimp
production increase by 14.0% y/y and 12.0% y/y. Secondary sector output will continue to suffer from lower petroleum
production and declines in citrus juice processing, but broad growth in wholesale and retail trade, transportation and
communication, tourism, and government services will likely push tertiary output 2.2% higher y/y.
The central bank also expects that gross international reserves will remain stable, but the external current account deficit
will narrow as higher earnings from tourism and goods exports more than offset greater merchandise imports. Finally, the
government will likely persist with efforts to achieve a primary fiscal surplus of 2.0% of GDP in 2018/2019, but public debt
will likely remain elevated at 95.0% of GDP during 2018.

Chart 3 Chart 4
Foreign Direct Investment (January–September) Developments in Credit Market Indicators (%)

140 (US$mlns) 6
Loans
120 5
100 4
80 3
60 2

40 1

20 0

0 -1
2011 2012 2013 2014 2015 2016 2017 2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 25

Bermuda Shane Lowe


CIBC FirstCaribbean
Production, Prices, and Employment
Latest official statistics from the Government of Bermuda suggest that real GDP expanded between 0.75% and 1.25%
during 2017.
 Total tourist arrivals increased 7.2% y/y during 2017. Arrivals by air and cruise advanced 10.3% y/y and 5.1% y/y,
th
respectively, while the number of passengers arriving by yacht surged 30.8% y/y as Bermuda hosted the 35
America’s Cup. Air arrivals from the USA, Canada, UK, Europe, and all other markets increased 8.4% y/y, 15.5%
y/y, 5.8% y/y, 29.1% y/y, and 30.3% y/y, respectively, while the average length of stay of those visiting by air
increased 4.5% y/y to 6.26 nights. Consequently, air and cruise visitors spent 22.5% more y/y and 7.6% more y/y,
respectively. However, since then, the number of arrivals by air, cruise and yacht declined 4.6% y/y, 83.1% y/y
and 42.9% y/y, respectively, during January 2018.
 Retail stores’ gross turnover increased 2.9% y/y during 2017. Having increased for 6 consecutive months by
August 2017, the volume of retail sales declined each month between September 2017 and December 2017.
Sales of retail stores fell 0.3% y/y in December 2017, as sales of food stores, liquor stores, service stations,
building material stores, and apparel stores contracted 2.3% y/y, 3.5% y/y, 1.0% y/y, 0.9% y/y, and 3.8% y/y,
respectively. In contrast, sales of motor vehicles stores and all other stores increased 11.7% y/y and 1.2% y/y.
 However, balance of payments data pointed to a deterioration in net external demand y/y during the first three
quarters of 2017. Imports of goods and services increased 8.1% y/y and outpaced a 5.0% y/y expansion in the
exports of goods and services. Further, available data suggest that construction activity declined 7.0% y/y over
the same period.
Employment income increased 3.0% y/y to US$797.2 mln during Q3 2017. Income earned by persons employed in
international business; hotels and restaurants; banking, insurance and real estate; and construction increased 7.0% y/y,
1.5% y/y, 1.3% y/y and 8.1% y/y, respectively, but those employed in business services, and wholesale and retail trade
both declined 1.0%. Overall, employment income increased 3.1% y/y over the first three quarters of 2017, while a 0.1%
y/y rise in employment kept the unemployment rate stable y/y at 7.0%.
Consumer prices increased 1.9% y/y in December 2017. The prices of food, and transportation and foreign travel
increased 3.3% y/y and 3.1% y/y, but rent declined 0.4% y/y.

Developments in Financial Markets


Similar declines in loans and deposits kept the loan-to-deposit ratio stable y/y in Q3 2017, but while bank solvency
increased, loan quality deteriorated over the same period.

Chart 1 Chart 2
Real GDP (%) Total Tourist Arrivals

8 800 4-qtr sum, 000s 12


10
6 750
8
6
700
4 4
650 2
2 0
600
-2
0 -4
550
-6
-2 500 -8
2014Q4 2015Q2 2015Q4 2016Q2 2016Q4 2017Q2 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17
Total Arrivals (L) Total Arrivals y/y% Growth (R)
Source: Government of Bermuda and CIBC FirstCaribbean. Source: Government of Bermuda and CIBC FirstCaribbean.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 26

 Banking sector loans declined 3.6% y/y. The shares of real estate-related loans and loans to other financial
institutions increased from 49.0% and 10.4% to 50.0% and 17.5% between September 2016 and September
2017, but the shares of loans for other business and services, and all other loans including those to individuals fell
from 5.9% and 34.7% to 5.4% and 27.1%, respectively.
 Lower savings (down 3.4% y/y), demand (down 3.9% y/y) and time (down 2.7% y/y) deposits reduced total
deposits 3.6% y/y. Thus, the loan-to-deposit ratio remained stable at 47.3%.
 Non-performing loans as a ratio of total loans increased 0.2 percentage points y/y to 7.1%, but the Basel III capital
adequacy ratio increased from 21.9% to 22.3%.
Government Debt
Over the six months ended September 2017, the government nominal fiscal deficit declined to US$63.4 mln from a deficit
of US$100.2 mln over the same period one year prior.
 Total revenues increased US$31.2 mln (6.3% y/y), as the government collected more revenues from customs
duties, payroll taxes and stamp duties. In contrast, revenues from the passenger tax and civil aviation receipts
contracted.
 Current expenditure excluding debt service declined US$6.4 mln y/y, as lower outlays on professional services
more than offset higher grants and contributions for the Bermuda Airport Authority and the America’s Cup. Interest
expense remained on par with 2016 levels while capital expenditure declined US$1.1 mln y/y.
Gross government debt remained relatively stable at US$2.5 bln between March 2017 and September 2017.

Outlook
The Government of Bermuda projects that real GDP will likely expand between 1.5% and 2.0% y/y during 2018. Greater
economic activity will likely benefit from greater investment in ongoing projects, persistent growth in tourism and ongoing
demand for financial services. The government also expects employment levels to continue to rise during the year, while
inflation will likely increase on account of greater demand for goods and services and some rebound in global commodity
prices. However, the recent cut in US corporate tax rates from 35% to 21% and the new base erosion and anti-abuse tax
pose significant downside risks to the competitive advantage enjoyed by the Bermudan insurance industry.

Chart 3
Current Account Balance/GDP (%)

30

25

20

15

10

0
2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3

Source: Government of Bermuda and CIBC FirstCaribbean.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 27

Cayman Islands Shane Lowe


CIBC FirstCaribbean
Production, Prices, and Employment
Except for a 0.9% y/y decline in agriculture and fishing output, latest estimates from the Cayman Islands Economics and
Statistics Office (ESO) for H1 2017 suggest that greater production in all sectors improved real GDP by 2.3% y/y.
 The economy’s largest sector – financing and insurance services – expanded 1.4% y/y during the first half of
2017. Total domestic credit declined 1.1% y/y as at June 2017, while the number of licenced bank and trust
companies, trust companies, insurance companies, and registered mutual funds declined 10.2% y/y, 2.5% y/y,
1.1% y/y and 3.6% y/y, respectively. In contrast, the number of stocks listed on the Cayman Islands Stock
exchange and total stock exchange market capitalisation increased 3.9% y/y and 11.6% y/y, while the number of
new company registrations and the number of partnerships rose 9.9% y/y and 10.2% y/y. Since then, the number
of bank and trust companies, insurance companies and registered mutual funds fell 5.7% y/y, 2.2% y/y and 0.3%
y/y, respectively, between December 2016 and December 2017.
 Real construction value added increased 4.0% y/y during H1 2017 compared to a 7.3% y/y expansion during Q1
2017. The number and value of building permits declined 8.3% y/y and 11.4% y/y, but the number and value of
project approvals surged 37.8% y/y and 30.8% y/y. Similarly, despite a 5.1% y/y contraction in the value of
property transfers, a 14.5% y/y rise in the number of property transfers coincided with a 2.4% y/y increase in
output in real estate, renting and business activities. Further, greater production of electricity (up 0.6% y/y) and
water (up 6.2% y/y) increased output in electricity and water supply by 4.1% y/y over the same period.
 Tourism GDP expanded 2.9% y/y during H1 2017. Total visitor arrivals declined 7.1% y/y as a 9.4% y/y
contraction in the number of cruise arrivals more than offset a 3.7% rise in stay-over arrivals. Stay-over arrivals
from the USA and Canada rose 6.8% y/y and 1.6% y/y, respectively, but the number of visitors from Europe and
other markets fell 18.0% y/y and 9.9% y/y. Commensurately, spending by stay-over visitors increased 7.7% y/y,
but spending by cruise visitors declined 5.9% y/y over the period. Since then, the number of stay-overs increased
8.5% y/y and 23.9% y/y during 2017 and January 2018, respectively, while the number of cruise visitors
rebounded 1.0% y/y and 20.2% y/y over the same periods.
Higher prices for transport (up 10.7% y/y) and food and non-alcoholic beverages (up 1.3% y/y) increased consumer prices
by 2.1% y/y between Q4 2016 and Q4 2017.

Chart 1 Chart 2
Key Economic Indicators (%) Tourism Indicators
4 440 (000's of persons)

420
3
400

380
2
360

1 340

320
Real GDP Growth Tourist Arrivals (12-month rolling)
0 300
2012Q2 2013Q2 2014Q2 2015Q2 2016Q2 2017Q2 2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 28

Developments in Financial Markets


Notwithstanding a 5.1% y/y fall in corporate loans, an 8.7% y/y rise in retail loans pushed total resident loans 3.4% higher
y/y during Q4 2017. Business loans and government loans fell 2.6% y/y and 13.3% y/y, but lending for mortgages and
consumer loans increased 7.4% y/y and 15.3% y/y.
Further, greater retail (up 6.1% y/y) and corporate (up 24.1% y/y) balances increased resident deposits by 11.9% y/y
during Q4 2017.
The weighted average interest rate spread on KYD loans and deposits increased 15 bps y/y to 6.91% during Q2 2017.
The weighted average lending and deposit rates increased 20 bps y/y and 5 bps y/y to 7.08% and 0.17%.

Government Debt
Higher revenues and lower spending increased the government fiscal surplus to US$176.4 mln during H1 2017 from
US$163.4 mln during H1 2016.
 Higher coercive (up US$7.0 mln y/y) and non-coercive (up US$1.4 mln y/y) receipts increased total revenue by
US$8.3 mln y/y to US$547.8 mln. Coercive receipts from taxes on international trade and transactions, and
domestic taxes on goods and services increased US$2.7 mln (2.6% y/y) and US$16.1 mln (4.5% y/y), but
collections of taxes on property, fines, and other taxes fell US$6.1 mln (15.7% y/y), US$0.5 mln (30.1% y/y) and
US$5.2 mln (97.8% y/y).
 Current expenditure fell US$9.1 mln y/y to US$343.6 mln. Spending on personnel costs and on transfer payments
increased US$5.0 mln (3.3% y/y) and US$0.6 mln (3.5% y/y), but outlays on supplies and consumables,
subsidies, depreciation, interest payments, and other executive expenses declined US$3.7 mln (6.6% y/y),
US$7.2 mln (8.5% y/y), US$2.6 mln (11.7% y/y), US$0.5 mln (3.2% y/y), and US$0.6 mln (22.1% y/y),
respectively. Net capital expenditure and net lending rose US$4.4 mln y/y to US$27.8 mln.
The central government debt declined 6.9% y/y to US$559.8 mln (approximately 15.9% of 2016 GDP) in June 2017.

Outlook
The government of the Cayman Islands suggests that, after a likely 2.1% y/y increase in real GDP in 2017, planned
private and public sector investments should accelerate real economic growth to 2.4% during 2018 and remain above 2%
annually over the medium-term. Consequently, the unemployment rate should fall below 4.0% to 3.6% in 2018 and
stabilise around 3.5% thereafter. Further, greater economic activity will likely contribute to accelerated inflation rates, with
inflation reaching 2.3% y/y in 2018.

Chart 3 Chart 4
Inflation (y/y; %) Growth in Key Balances (%)

5 All Items (L) 15


70 Growth in Loans
4 Food (L) 10
Fuel and Light (R)
60 Growth in Deposits
3 5 50
2 0 40
1 -5 30
0 -10 20
-1 -15 10
0
-2 -20
-10
-3 -25
-20
-4 -30
-30
2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4
2013Q4 2014Q4 2015Q4 2016Q4 2017Q4

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 29

Chart 5 Chart 6
Growth in Corporate Loans and Mortgages (%) Interest Rates (%)

160 8 Weighted Average Lending Rate


Growth in Corporate Loans
140 Prime Lending Rate
Growth in Mortgages
120
6
100
80
60 4
40
20
0 2
-20
-40 0
2013Q4 2014Q4 2015Q4 2016Q4 2017Q4 2012Q2 2013Q2 2014Q2 2015Q2 2016Q2 2017Q2

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 30

Costa Rica Luis Hurtado


CIBC Macro Strategy
Production, Prices and Employment
2017 GDP growth came in at 3.2% y/y, decelerating from the 4.2% posted in 2016 and 0.6 p.p. below the Banco Central
of Costa Rica’s estimates in July 2017. The deceleration in growth was driven by the decline in private investments,
especially construction, increases in the overnight rate, and exchange rate fluctuations. Moreover, H2 2017 also endured
the negative impact from natural disasters, delayed projects and destroyed infrastructure and crops.
 Services continued to increase in relevance, accounting for 68% of total GDP, up from 64% in 2012. Professional
services increased 5.8% in 2017, down from the 6.1% posted in 2016. The increase in the service sectors was
driven by financial consulting services.
 Health and education services rose 2.8%, while the telecommunication services increased 7.4%. Both sectors
maintained similar levels of growth with respect to 2016. On the other hand, growth in insurance and financial
services decelerated to 5.8% after posting 14.9% in 2016
 Manufacturing increased 3.8%, down 0.8 p.p. from 2016, while construction dropped 6.4% as private construction
dropped 10.8%.
Looking at GDP by expenditure, private consumption (up 1.8 p.p.) contributed the most to growth in 2017, followed by
exports (up 1.6 p.p.), and government consumption (up 0.5 p.p.). However, as expected by the decline in construction,
investment subtracted 0.6 p.p. from GDP growth in 2017.
 Household consumption’s (up 2.6%) deceleration continued into H2 2017, as a result of higher interest rates
together with weaker consumer confidence. Gross fixed capital dropped 3.1%, down from the 4.0% expansion in
2016, while government consumption growth came in at 2.9%, up 0.5 p.p. from 2016.
 Exports of goods and services grew 4.9%, as goods exports and services exports increased 5.8% and 3.6%,
respectively. Imports of goods and services increased 3.0% driven by a 9.3% increase in import services.
February inflation came in at 2.2% y/y, down from the 2.4% y/y posted in January, but remained within the Banco Central
of Costa Rica BCCR’s target range (3% +/- 1%). Out of the 315 goods and services in the basket, 52% increased, 39%
dropped while 9% showed no change.
After increasing the reference rate by +300bps since the start of 2017, the BCCR continued its tightening cycle in
February, increasing the overnight rate by +25bps to 5%. Nevertheless, in its most recent interest rate announcement the
BCCR remained on hold. The statement highlighted that inflation expectations in January came in at 3.7%, remaining
within in the central bank’s target range for 34 consecutive months. Nevertheless, it stated that the de-dollarization
process decelerated and that it would continue to monitor this factor in order to prevent upward pressure on the exchange
rate and inflation.
Table 1 Chart 1
Key Economic Indicators & Forecast Real GDP (y/y; %)
Key Annual Indicators 2014E 2015E 2016 2017 2018F 8
Real GDP Growth* 3.7% 4.7% 4.2% 3.2% 3.2%
Inflation (End of Period) 5.1% -0.8% 0.8% 2.6% 3.2% 6
Prim. Central Govt Fiscal Balance (% GDP) -3.1% -3.1% -2.3% -3.1% -3.5%
4
Nom. Central Govt Fiscal Balance (% GDP) -5.7% -5.9% -5.3% -6.2% -7.0%
Exchange Rate (US$/CRC) 539.4 537.0 553.0 580.0 590.0 2
Policy Interest Rate (End of Period) 5.25% 1.75% 1.75% 4.75% 2.25%
Current Account (% of GDP) -4.8% -3.6% -2.6% -3.1% -3.5% 0
Central Gov't Debt/GDP 39.3% 42.7% 45% 49.2% 52%
-2

-4
Mar-09 Apr-10 Jun-11 Aug-12 Oct-13 Nov-14 Jan-16 Mar-17

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 31

Government Debt
2017 central government revenue came in at CRC 4741.9bln (3.83%), while total expenses came in at CRC 6764.0bln
(+9.08%). The 12-month nominal deficit came in at 6.2% of GDP, up 0.9 percentage points from 2016’s 5.3%. The
12-month primary deficit also deteriorated from the 2.21% of GDP posted in October 2016 to 2.74% of GDP as of October
2017.
With 39 votes in favour, Costa Rica’s Congress approved fast-tracking the revenues (VAT, Income Tax) and expenditure
bills (salaries and fiscal rule) on February 28. The government expects congress to approve the long-debated bills before
the end of the current legislative cycle (April 30). This is a positive development for the COSTAR curve. We expect rating
agencies to highlight the improvement, but to reiterate the need to implement further fiscal adjustments, especially on the
expenditure side.

2018 Presidential Race


As we mentioned in our February 5 note “Fabricio Alvarado (PRN) faces Carlos Alvarado (PAC) in Runoff”, Fabricio
Alvarado’s victory and a more fragmented composition of congress increased the level of caution in Costa Rican assets
following the first round election. Nevertheless, the approval of the fast-track route for the revenues and expenditure bills,
and F. Alvarado’s decision to appoint a market friendly economic team prompted a reversal of the negative sentiment in
place since mid-January. Among the economic team appointed by F. Alvarado, we have Edgar Ayales, former finance
minister and former PLN vice-president candidate; Luis Mesalles, previous advisor to the Costa Rican Union of Chamber
of Private Enterprise, Banco Central de Costa Rica, and former vice president of the board of the Central Bank of Costa
Rica; and Gerardo Corrales former general manager and executive vice president of Grupo Financiero BAC Credomatic.
Latest polls suggest a technical tie. However, given the recent economic team appointment and the anticorruption
sentiment in the air, we expect Fabricio Alvarado to maintain a slight edge going forward.

Outlook
Growth decelerated significantly in 2017 coming in below our 3.5% forecast and well below the 3.8% expected by the
central bank in 2017. We expect consumption and investment to remain depressed, in line with a hawkish central bank
and weak consumer confidence indicators. Moreover, given the frail fiscal situation, we do not expect to see support from
the government side of the equation. Nevertheless, we expect exports to support growth in 2018 although facing
increasing risks. Hence, we have updated our 2018 GDP forecast to 3.2%, down 0.6 p.p from our previous estimate and
0.4 p.p. from the current central bank forecast. The fiscal situation remains the most challenging point for the country in
2018. With a still high level of uncertainty in the latest polls, we expect the central government nominal deficit to increase
to 7% of GDP and the primary deficit to remain at 3.5% of GDP.

Chart 2 Chart 3
Inflation (y-o-y; %) Government Debt and Deficits

7 Nominal Govt. Bal. (% GDP, L)


1.0 60
6 Govt. Debt (% GDP, R)
0.0
5 50
-1.0
4 40
-2.0
3
CPI Inflation -3.0 30
2
1 -4.0
20
0 -5.0
10
-1 -6.0
-2 -7.0 0
Jan-11 Nov-11 Oct-12 Aug-13 Jul-14 May-15 Apr-16 Feb-17 2003 2006 2009 2012 2015E 2018F

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 32

Curaçao Shane Lowe


CIBC FirstCaribbean
Production, Prices, and Employment
Having declined by 1.0% y/y during Q2 2017, the Centrale Bank van Curaçao en Sint Maarten estimates that real value
added contracted 1.4% y/y during Q3 2017.
 Tourism GDP declined 8.9% y/y as a 14.9% y/y contraction in the number of stay-over arrivals more than offset
an 87.4% y/y surge in the number of cruise tourists. Cruise tourism benefited from the opening of a second major
pier and additional cruise ships from cruise lines who changed their itineraries during September after the
disruption triggered by Hurricanes Irma and Maria in the northern Caribbean. Stay-over arrivals from North
America, Europe, Latin America, and the Caribbean all fell 2.2% y/y, 2.7% y/y, 37.8% y/y, and 30.1% y/y,
respectively. Specifically, the cancellation of the 2017 Curaçao North Sea Jazz Festival and ongoing economic
difficulties in Venezuela contributed substantially to weaker tourism performance. Since then, total stay-over
arrivals and nights spent by stay-over visitors declined 10.6% y/y and 1.3% y/y over the first eleven months of
2017. Arrivals from the USA, Canada and the Netherlands increased 1.8% y/y, 6.3% y/y and 0.7% y/y, but arrivals
from all other markets declined. Specifically, the number of visitors from neighbouring Venezuela and Aruba fell
53.2% y/y and 22.1% y/y. In contrast, the number of cruise passengers surged 31.2% y/y over the same period.
 Developments in tourism negatively affected growth in wholesale and retail trade, and transport, storage and
communications. Fewer stay-over arrivals generated less spending and reduced wholesale and retail trade by
2.0% y/y, while fewer commercial and passenger landings at the airport, and fewer ships piloted into the harbour
reduced transport, storage and communications by 1.0% y/y. Finally, while construction and utilities output each
expanded 3.5% y/y and 1.7% y/y, manufacturing activity fell 3.9% y/y.
Higher prices for food (up 2.1% y/y), housing (up 2.8% y/y), transport and communication (up 1.7% y/y) and
housekeeping and furnishing (up 0.9% y/y) increased consumer prices by 1.7% y/y during 2017. Only the prices of
clothing and footwear (which accounts for less than 5% of the consumer price index) declined (down 3.3% y/y) during the
year.
Developments in Financial Markets
Faster growth in deposits than in loans increased banking sector liquidity during 2017.
 A 34.0% y/y plunge in lending to non-residents more than offset a 2.6% y/y rise in resident loans to reduce total
loans by 0.9% y/y. Retail loans increased 3.1% y/y as a 0.6% y/y rise in mortgages supported a 6.1% y/y increase
in consumer loans. However, declines in lending to businesses (down 1.5% y/y) and the public sector (down
89.5% y/y) reduced corporate loans by 3.4% y/y.
 Similarly, deposits from non-residents declined 10.0% y/y, but resident retail and corporate deposit balances
increased 6.6% y/y and 4.3% y/y. In sum, total deposits increased 4.4% y/y during the year.

Chart 1 Chart 2
Key Economic Indicators (%) Inflation (y/y; %)

0.6 Real GDP growth (L) 30 8


0.4 All Items Food
Tourist Arrivals (R) 20 6
0.2
0.0 10
-0.2 4
-0.4 0
2
-0.6 -10
-0.8
0
-1.0 -20
-1.2 -2
-30
-1.4
-1.6 -40 -4
2012Q3 2013Q3 2014Q3 2015Q3 2016Q3 2017Q3 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17

Source: Central Bank of Curaçao and St. Maarten, Caribbean Tourism Organization and CIBC Source: Central Bank of Curaçao and St. Maarten and CIBC FirstCaribbean.
FirstCaribbean.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 33

 Ultimately, the total loans to total deposits ratio fell from 76.4% at December 2016 to 72.5% twelve months later.
Similarly, resident loans as a ratio of resident deposits declined 1.7 percentage points y/y to 71.0%.
The central bank’s net official reserves advanced 11.0% y/y to US$1.87 bln during December 2017.
Government Debt
Over the first three quarters of 2017, the government’s current budget balance worsened to a deficit of US$31.8 mln
compared to a deficit of US$16.8 mln during the corresponding period one year prior.
 Total revenues increased US$3.0 mln y/y to US$988.7 mln. Declines in taxes on income and profits (down
US$6.4 mln y/y) and taxes on international trade and transactions (down US$2.7 mln y/y) more than offset greater
collections of taxes on property (up US$1.4 mln y/y) and taxes on goods and services (up US$0.9 mln y/y) to
reduce total tax receipts by US$6.3mln y/y to US$600.2 mln. However, non-tax and other revenues expanded
US$9.3 mln y/y to US$388.4 mln.
 Current expenditures increased US$18.0 mln y/y to US$1.02 bln. The government spent US$3.0 mln (1.0% y/y)
and US$5.6 mln (0.9% y/y) less on wages and salaries, and transfers and subsidies, but outlays on goods and
services, interest on debt, and other expenditures increased US$8.9 mln (15.1% y/y), US$1.1 mln (6.4% y/y) and
US$16.6 mln (60.8% y/y).
Total public debt increased 6.6% y/y to US$1.53 bln (49.1% of GDP) by September 2017. The stock of domestic debt
increased 63.6% y/y to US$249.3 mln, but foreign debt outstanding declined 0.2% y/y to US$1.28 bln. However, during
Q3 2017, the government withdrew some of its deposits in the banking system and accumulated arrears with the public
pension fund to assist in financing in budget deficit.

Outlook
Weak economic performance over the first three quarters of 2017 suggest that economic activity likely declined during
2017. Further, the Centrale Bank van Curaçao en Sint Maarten projects that real GDP will likely rebound by just 0.3% y/y
in 2018, as improvements in private and public investment and public consumption just offset an expected decline in
private consumption. However, the central bank does expect that government will likely reverse the negative trend in its
current budget balance and record a balanced budget during 2018.

Chart 3
Developments in Credit Market Indicators (%)
20 Loans
NPLs/Total Loans
15

10

-5
2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 34

Dominica Shane Lowe


CIBC FirstCaribbean
Production, Prices, and Employment
Notwithstanding the damage inflicted during the passage of Hurricane Maria – a category 5 hurricane – during September
2017, the ECCB estimates that economic activity improved during the first three quarters of 2017.
 Despite a 3.6% y/y fall in arrivals during Q3 2017, total stay-over arrivals increased 8.9% y/y over the nine months
ending September 2017. Arrivals from the USA, Canada, UK, Caribbean and all other markets increased 2.5%
y/y, 13.9% y/y, 14.6% y/y, 5.0% y/y and 20.1% y/y, respectively. However, while the number of yacht passengers
increased 5.1% y/y, the number of excursionists (down 31.5% y/y) and cruise ship passengers (down 7.7% y/y)
reduced total visitors to Dominica by 3.3% y/y.
 Greater government spending on reconstruction and rehabilitation after Tropical Storm Erika in August 2015
contributed primarily to the surge in construction GDP during the first three quarters of 2017 – capital expenditure
surged 98.3% y/y. In contrast, available indicators point to some reduction in private sector activity. The value of
housing starts declined 28.8% y/y, while commercial bank loans to households for home construction and
renovation, along with lending to commercial construction firms declined 2.0% year-to-date and 0.4%
year-to-date, respectively.
 Greater production of bananas (up 1.6% y/y) and non-banana crops and livestock imply greater agriculture output.
However, manufacturing activity suffered from declines in paint (down 29.4% y/y) and beverage (down 20.5% y/y)
production.
Since then, destruction of crops and a fall-off in tourist arrivals associated with the passage of Hurricane Maria in
September 2017 likely reduced economic activity in 2017.
Notwithstanding declines in the prices of food and non-alcoholic beverages (down 0.1% y/y) and housing, utilities, gas
and fuels (down 0.6% y/y), higher prices for transportation (up 1.1% y/y), and clothing and footwear (up 3.1% y/y)
increased consumer prices by 0.3% y/y in September 2017.

Developments in Financial Markets


Strong deposit growth and negative loan growth combined to further increase bank liquidity y/y during Q4 2017. However,
since Hurricane Maria’s passage in September 2017, banking sector profitability and loan delinquency have both
deteriorated.
 Total loans fell 3.4% y/y. Lending for personal mortgages, consumer loans, business loans, and public sector
loans declined 1.4% y/y, 3.1% y/y, 2.5% y/y, and 14.8% y/y, respectively.
 Further, while time and foreign currency deposits contracted 2.2% y/y and 12.5% y/y, greater demand (up 16.1%
y/y) and savings (up 15.1% y/y) deposits increased total deposits by 12.0% y/y.
Chart 1 Chart 2
Stay-Over Tourist Arrivals Inflation (y/y; %)

2,500 (US$/person) Visitor Expenditure/person (L) (000's) 100 4 All Items (L) 6
Stay-Over Arrivals (R) Food (L)
95
2,000 3 Fuel and Light (R) 4
90
2 2
1,500 85
1 0
1,000 80

75 0 -2
500
70 -1 -4

0 65 -2 -6
Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 2012Q3 2013Q3 2014Q3 2015Q3 2016Q3 2017Q3
Source: Eastern Caribbean Central Bank and CIBC FirstCaribbean. Source: Eastern Caribbean Central Bank and CIBC FirstCaribbean.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 35

 Thus, the loan-to-deposit ratio fell 6.6 percentage points y/y to 41.3%. Consequently, weighted average lending
and deposit rates declined 16 bps y/y and 10 bps y/y, respectively, to 7.96% and 1.60%.
 The non-performing loans ratio increased 3.0% y/y to 17.4% and return on assets fell 2.4 percentage points y/y to
-1.6%, both likely related to the likely economic contraction following the damage caused by Hurricane Maria.
Government Debt
Despite some improvement in tax revenues, a sharp decline in Citizenship-by-investment related non-tax revenues and
greater current and capital expenditure worsened the fiscal balance from a US$158.0 mln surplus during January –
September 2016 to a US$8.7 mln deficit during January – September 2017.
 Current revenue plunged US$110.6 mln y/y to US$192.5 mln. Non-tax revenues tumbled to US$88.9 mln,
US$117.8 mln lower than the prior year, but still US$66.5 mln greater than the outturn recorded during January to
September 2015. In contrast, taxes increased US$7.2 mln y/y to US$103.6 mln as receipts from all major tax
categories increased. Taxes on income and profits, taxes on property, taxes on domestic goods and services, and
taxes on international trade and transactions increased US$0.9 mln (4.6% y/y), US$1.1 mln (57.1% y/y), US$3.1
mln (5.6% y/y), and US$2.0 mln (10.6% y/y). Total grants received rose US$3.0 mln y/y to US$10.7 mln, while
capital revenue increased from US$36k to US$68k.
 Current expenditure increased US$14.4 mln y/y to US$121.7 mln. Spending on personal emoluments, goods and
services, and transfers and subsidies increased US$0.1 mln (0.2% y/y), US$9.1 mln (28.7% y/y), and US$5.3 mln
(21.1% y/y), but interest payments declined marginally US$0.1 mln (1.6% y/y) in line with a lower public debt
stock. Capital expenditure and net lending surged US$44.8 mln y/y to US$90.3 mln.
Total public debt declined from US$401.8 mln (69.1% of 2016 GDP) at September 2016 to US$383.2 mln (71.1% of
projected 2017 GDP) at September 2017.

Outlook
The ECCB estimates that the passage of Hurricane Maria during September 2017 likely reduced real GDP by 6.2% during
2017. However, the central bank expects that much stronger construction activity associated with post-Maria rebuilding
and a rebound in other economic sectors should propel output 10.6% higher y/y in 2018. However, if the government
receives insufficient grants to fund the expected rise in expenditure, the government’s fiscal balance will likely deteriorate
further, and debt will rise in 2018.

Chart 3 Chart 4
Public Sector Debt Outstanding Growth in Key Balances (%)

420 (US$mln) 25
Loans

410 20 Deposits

15
400
10
390
5
380
0
370
-5
360 -10
2013Q3 2014Q3 2015Q3 2016Q3 2017Q3 2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 36

Dominican Republic Luis Hurtado


CIBC Macro Strategy
Production, Prices and Employment
In line with our expectations, 2017 GDP came in at 4.6% as economic activity growth increased 5.0% y/y, 6.5% y/y, and
7.4%, respectively, in October, November, and December, according to the preliminary results published by the Banco
Central Republica Dominicana (BCRD). Although the surge in activity lifted 12m growth from 4.3% y/y in Q3, it still
showed a significant deceleration from the 7% and 6.6% growth rates posted in 2015 and 2016, respectively.
 Hotels, bars, and restaurants (6.8% y/y), financial services (6.2% y/y), and agriculture (5.9% y/y) contributed the
most to growth in 2017. However, both agriculture and financial services decelerated from the 10% y/y and 11.9%
y/y recorded in 2016.
 In line with the trend seen during the year, local manufacturing and commerce each decelerated to 3.0%, from
5.0% and 6.5%, respectively.
 Mining declined 3.4%, slowing considerably from the strong 26.5% gain in 2016.
The Q3 2017 current account posted a surplus of US$12.9mln, improving from the US$83mln deficit recorded in Q2 2017
and the US$452mln deficit of a year earlier. With this number, the 12 month current account deficit landed at 0.36% of
GDP, below the 1.7% deficit posted in 2016 and the 1.01% deficit in Q2 2017. As in previous quarters, the drop in imports
and the increase in remittances (up 14.34% y/y) drove this result.
Inflation remained inside the BCRD 3%-5% target range, coming in at 3.3% y/y in February, down from January’s 3.9%
th
y/y. Core prices remained below the target range for the 38 consecutive month. Looking at inflation by groups of goods
and services, alcoholic beverages (down 0.64% m/m), housing (down 0.63% m/m) combined to counteract the 0.27%
m/m, 1.08% m/m, and 0.4% m/m increases in transportation, alcoholic beverages and tobacco, and health services
prices, respectively.
th
On February 28, the BCRD decided to keep the overnight rate at 5.25% for the 8 consecutive month. In the statement,
the central bank mentioned still below-target inflation, the recent acceleration in growth due to the monetary easing
measures adopted in 2017, the 12% y/y growth in private credit in local currency, and the improving business confidence
indicators. Moreover, the central bank indicated its forecasts models show GDP growth landing in the 5.5%-6.0% range
this year. Overall, a neutral tone to the statement, with the central bank focusing on growth as inflation is estimated to
remain within the 4.0% +/- 1% range in the monetary policy horizon (24 months).

Table 1 Chart 1
Key Economic Indicators & Forecast Real GDP (y/y; %)
Key Annual Indicators 2014 2015 2016F 2017F 2018F 12%
Real GDP Growth* 7.3% 7.0% 6.5% 4.6% 5.0% 10%
Inflation (End of Period) 1.6% 2.3% 1.7% 3.3% 3.9%
Prim. Central Govt Fiscal Balance (% GDP) -0.3% 2.7% 0.06% 0% -0.12% 8%
Nom. Central Govt Fiscal Balance (% GDP) -2.77% 0.11% -2.84% -3.2% -2.7% 6%
Exchange Rate (US$/CRC) 44.4 45.5 46.7 48.1 49.1
4%
Policy Interest Rate (End of Period) 6.25% 5.0% 5.50% 6.0% 6.25%
Net Govt Debt (% of GDP) 33.7% 34.4% 36.7% 39.0% 38.5% 2%
0%
-2%
-4%
-6%
Jan-06 Mar-08 May-10 Jul-12 Oct-14 Dec-16

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 37

Government Debt
NFPS revenues (excluding donations) increased 10.5% to DOP 537.2mln. Total expenditures reached DOP 651mln,
increasing 12.2%. With the slowdown in economic growth, the reconstruction efforts following natural disasters during the
year, and the construction of the Punta Catalina project, the NFPS nominal deficit reached 3.2% of GDP or 0.9 p.p. above
the initial 2.3% deficit target.
In 2017, gross NFPS debt reached US$29.5bln or 40.0% of GDP. External debt at US$18.8bln accounted 25.5% of GDP,
while local debt and intragovernmental debt reached US$7.8bln and US$2.9bln, respectively. In February, the Dominican
Republic issued bonds for a total of US$1.8bln. The issuance consisted of US$1bln of 30Y bonds placed at a rate of 6.5%
and a DOP 800mln issue at 8.9%.

IMF Article IV Review


The IMF latest Article IV statement highlighted the good performance of the Dominican economy despite the deceleration
due to external factors (i.e., weather). It also sees 2018 growth at 5.5% driven by reinvigorated credit growth and benign
external conditions. Although the overall picture on growth is favourable in the statement, the IMF mentioned higher oil
prices, tighter-than-anticipated global financial conditions, and weaker-than-expected projected external demand as the
main downside risks. On the fiscal front, the IMF welcomed the efforts made by the government to strengthen the fiscal
position. Nevertheless, it addressed the need for more meaningful consolidation measures to address structural fiscal
weakness. Here, the staff concluding statement suggested focusing on the broadening of the tax base, streamlining tax
incentives and exemptions, and simplifying the tax system.

Outlook
The acceleration in economic activity, global economic growth, especially from the US, and the lower base due to the
2017 natural disasters in the country, continue to bode well for growth this year. Hence, we expect growth to come in at
5% in 2018 with an upward bias, mostly coming from sectors linked to tourism. With regards to prices, we expect inflation
to approach the BCRD’s inflation target by year end, as growth accelerates and commodity prices increase. Moreover, we
expect the current account deficit to increase to 1.5% of GDP in 2018 driven by an increase in imports (higher oil prices).
Regarding the fiscal account, we expect the government to fall short of its 2.3% deficit target, landing at around 2.7% of
GDP in 2018.

Chart 2 Chart 3
Inflation (y-o-y; %) Government Debt and Deficits
16% 0.5 40.0
14% 0.0 39.0
12% -0.5 38.0
10% 37.0
-1.0
8% 36.0
-1.5
6% 35.0
-2.0
4% 34.0
-2.5 33.0
2%
0% -3.0 32.0
-2% -3.5 31.0
-4% 2014 2015 2016 2017F 2018F
Mar-09 Dec-10 Sep-12 Jul-14 Apr-16 Jan-18 Nom. Gov't Bal. (%GDP, L) Govt Debt (% GDP, R)

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 38

El Salvador Luis Hurtado


CIBC Macro Strategy
Production, Prices and Employment
Q3 2017 GDP growth came in at 2.37% y/y, up from the 2.25% increase posted in Q2, but down from Q2 2016’s 2.39%
y/y.
 Real estate and business services (up 3.86% y/y), agriculture, hunting, forestry and fishing (up 3.17% y/y),
construction (up 2.91% y/y), and commerce, restaurants and hotels (up 2.9% y/y) contributed the most to this
increase. Out of all sectors, only utilities (-0.56% y/y) contributed negatively to GDP growth in Q3.
More recent data point to a continuation of this trend with growth in total economic activity coming it at 3.09% y/y, 3.19%
y/y, and 3.26% y/y, respectively, in October, November, and December. December’s growth was driven by the 17.43%
y/y, 10.5% y/y, and 4.82% y/y increases in construction, mining and quarrying, and commerce, restaurants and hotels.
Leading indicators also bode well for consumption growth as remittances maintained healthy levels of growth, coming in
at 8.3% y/y, 6.3% y/y, and 10.3% y/y, respectively, in November, December, and January, while nominal salaries and
personal credit increased 4.9% and 4.1% in January.
 Despite the increase in remittances and its positive impact on consumption during the last year, it is important to
highlight that remittances from the US account for 97.3% of total remittances or roughly 18% of GDP. As we
mentioned in our note published on January 8, 2018, the termination of the TPS would likely have an impact on
economic growth in the medium-term. However, the short-term impact is likely to be minimal as Salvadorans rush
to send back or reallocate any savings before the 2019 deadline. Going forward, however, the government is
likely to face significant challenges, especially as they are left to deal with increasing security issues and budget
deficits. Moreover, the 2019 deadline aligns with the maturity of US$800mln (ELSALV ‘19s), increasing political
turmoil as the government looks to approve additional sources of financing.
 Looking at external indicators, exports continued to grow at a healthy pace, increasing 17.3% y/y in January.
Sugar exports contributed 8.3 p.p. to total exports growth. On the other hand, imports reached US$930.4mln in
January increasing 9.6% y/y, as capital goods grew 8%.
2018 February inflation landed at 1.4% y/y, dropping from the 2.0% posted in December, but well above the -0.3% y/y at
the start of 2017.

Table 1 Chart 1
Key Economic Indicators & Forecast Real GDP (y/y; %)
Key Annual Indicators 2014E 2015E 2016F 2017F 2018F 5%
Real GDP Growth* 1.4% 2.3% 2.4% 2.4 % 2.5% 4%
Inflation (End of Period) 0.5% 1.0% -0.9% 2.0% 1.5%
3%
Prim. NFPS Fiscal Balance (% GDP) -1.2% -0.8% -0.2% -0.0% 0.1%
Nom. NFPS(% GDP) -3.6% -3.3% -2.8% -2.3% -2.4% 2%
Current Account (% of GDP) -4.8% -3.6% -2.0% -1.8% -3.0% 1%
Debt/GDP 57.8% 60.1% 61.8% 62.7% 63.5% 0%
-1%
-2% Real GDP Growth y/y
-3%
-4%
-5%
Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 39

Government Debt
The numbers released by the Central Bank of El Salvador indicate that NFPS revenue (including donations) reached
US$5.9bln in 2017, increasing 6.52% from the same period last year. Income taxes, VAT, and import tariff, up
US$75.61mln (4.56%), US$90.42mln (4.99%), and US$4.34mln (2.1%) contributed the most to revenue growth. On the
other hand, NFPS expenses increased 3.5%, reaching US$5.96bln in 2017. The increase in expenses responded to the
increase of interest payments and capital transfers.
The 12-month central government nominal deficit came in at US$71.86mln (-0.26% of GDP), improving from the
US$230mln deficit (-0.86% of GDP) posted in 2016. The 12-month primary surplus came in at US$727.9mln (2.67% of
GDP), up from the US$474.85mln (1.77% of GDP) surplus posted in 2016.

Legislative Elections
With 80% of the acts counted, ARENA emerged as the big winner in the March 4 election, securing 38 seats out of the 84
seats in congress. FMLN lost its veto power obtaining only 22 seats as of the latest count, while PCN and GANA reached
10 and 9 seats. With these results, ARENA and GANA, if they continue to collaborate, would have a simple majority (44)
or at least enough votes to approve laws and reforms. Moreover, to appoint the Attorney General and approve future
budgets (56 votes - 2/3), ARENA would have to negotiate with GANA and the PCN.
We expect ELSALV bonds to benefit from the results as the market interprets ARENA’s victory and the FMLN losing its
veto power as a sign of an improving governability going into next year. If momentum carries into next year, ARENA is
likely to be the first government since the civil war that could bypass any opposition veto. Nevertheless, extension of the
short-term positive environment would depend on the odds of the FMLN making a comeback and the IMF Article IV
review to be released late in March. For more details please refer to our El Salvador – 2018 Legislative elections note
published on March 7.

Outlook
A positive outlook for the Salvadoran economy has started to take shape in 2018. The approval of the 2018 budget,
ARENA’s victory in the legislative election, and still healthy levels of remittances and exports growth should improve
confidence indicators in the country and maintain a similar growth level in 2018. Hence, we have updated our GDP
forecast to 2.5% for 2018 from 2.0%. On the fiscal front, The government is hoping to secure a budget support loan from
the Inter-American Development Bank. The loan would be used to cover the government’s financial needs as proposed in
the 2018 Budget approved in January. Although government officials have remained optimistic regarding an agreement,
approval of the loan appears to be contingent on a positive IMF Article IV review. Further improvement of the fiscal picture
would depend on the odds of the FMLN making a comeback into next year’s presidential election. For now, focus would
be put into negotiations around the approval of any liability management as US$800mln in external bonds mature in 2019.

Chart 2 Chart 3
Inflation (y-o-y; %) Government Debt and Deficits

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 40

Grenada Shane Lowe


CIBC FirstCaribbean
Production, Prices, and Employment
Stronger performances in construction, tourism and manufacturing boosted economic activity during the first three
quarters of 2017 relative to the same period one year earlier.
 Notwithstanding a 25.8% y/y decline in the government’s capital expenditure and declines in lending to
construction companies (down 0.3% year-to-date) and individuals for home construction and renovation (down
3.0% year-to-date), a 24.2% y/y surge in the volume of construction material imports implies that real value added
in construction expanded over the review period. Construction benefited from strong growth in tourism-related and
other private sector-related investments, while public sector activity benefited from ongoing works on the Houses
of Parliament, roads and schools. Consequently, activity in transport, storage and communications, mining and
quarrying, and wholesale and retail trade benefited from strong growth in construction.
 Growth in total stay-over arrivals accelerated by 6.9% y/y during the first nine months of 2017 compared to a 2.8%
y/y increase one year prior. Arrivals from the UK fell 6.3% y/y, but the number of visitors from the USA, Canada,
the Caribbean, and other markets expanded 16.2% y/y, 8.9% y/y, 8.6% y/y, and 1.5% y/y, respectively, as
Grenada hosted a number of sporting events during the period. In contrast, while the number of yacht passengers
rose 1.8% y/y, the number of excursionists and cruise ship passengers contracted 67.8% y/y and 16.5% y/y. As a
result, total visitor arrivals declined 8.8% y/y, but total visitor expenditure rebounded 27.2% y/y.
 Further, stronger non-rum beverage production lifted manufacturing output higher. Rum production declined
14.0% y/y, but soft drink production doubled, while beer, malt, and stout output increased 10.7% y/y, 1.9% y/y,
and 0.6% y/y. Meanwhile, paint production rose 3.3% y/y, but production of acetylene, oxygen, wheat bran,
poultry feed, and flour fell 18.4% y/y, 5.7% y/y, 12.5% y/y, 2.0% y/y, and 14.8% y/y, respectively.
 In contrast, adverse weather and plant diseases reduced output in agriculture. “Other crops” production (which
includes fruits, ground provisions and vegetables) fell 24.4% y/y while cocoa output shrank 3.2% y/y. However,
production of mace, nutmeg, and bananas expanded 33.6% y/y, 33.4% y/y, and 2.5% y/y, respectively.
Despite a 0.5% y/y fall in the price of transportation, higher prices for food and non-alcoholic beverages (up 1.6% y/y) and
housing, utilities, gas and fuels (up 0.3% y/y) increased consumer prices 0.6% y/y.

Developments in Financial Markets


Having declined by 1.8% y/y during 2016, total loans and advances remained stable during 2017. Positive deposit growth
has increased banking sector liquidity, while major financial stability indicators point to a mixed performance during the
year.

Chart 1 Chart 2
Stay-Over Tourist Arrivals Inflation (y/y; %)

1,400 (US$/person) (000's) 160 4 All Items


1,200 140 3 Food
Fuel and Light
120 2
1,000
100 1
800
80 0
600
60 -1
400 Visitor Expenditure/person (L)
40 -2
Stayover arrivals (R)
200 20 -3
0 0 -4
Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 41

 Greater corporate loans (up 2.9% y/y) exactly offset a 1.6% y/y fall in retail loans. Business loans and consumer
loans increased 3.5% y/y and 0.2% y/y, but mortgages and public sector loans declined 3.3% y/y and 3.2% y/y.
 Total deposits increased 4.6% y/y. Demand deposits, savings deposits and foreign currency deposits increased
13.0% y/y, 2.6% y/y, and 46.5% y/y, respectively, but time deposits contracted 16.9% y/y.
 The loan-to-deposit ratio fell 2.6 percentage points y/y, and the average interest rate spread narrowed by 33 bps
y/y to 6.66%. Weighted average lending and deposit rates fell 45 bps y/y and 12 bps y/y to 7.98% and 1.32%.
 The return on assets and capital adequacy ratio each fell 0.4 percentage points y/y to 1.1% and 13.8% during Q4
2017, but the non-performing loans ratio declined from 6.7% to 3.9%.
Government Debt
During 2017, the Government of Grenada produced larger primary and overall fiscal surpluses compared to one year
earlier and original targets. The primary balance increased to US$64.7 mln (5.8% of GDP) by 17.7% y/y and 17.5%
relative to target, while lower interest payments increased the overall fiscal balance by 46.4% y/y and 54.3% relative to
the target of US$35.8mln (3.2% of GDP).
 Total revenue and grants rose 3.5% y/y to US$288.2 mln, but fell 4.6% below the target. Revenues increased to
US$259.3 mln (7.4% higher y/y and 5.4% higher relative to the target) as receipts from the Citizenship-by-
Investment programme increased 81.0% y/y to US$51.8 mln. Meanwhile, grants received fell to US$28.9 mln
(down 21.9% y/y and 48.6% relative to the target).
 Total spending declined to US$252.4 mln (down 0.6% y/y and 9.5% compared to the original budget). Interest
payments fell to US$28.9 mln (down 5.2% y/y and 9.4% compared to the target), in line with a falling debt stock.
However, higher non-interest current spending increased total recurrent expenditure to US$222.6 mln (up 6.3%
y/y and 0.3% compared to the target). Commensurate with falling grant receipts, capital expenditure plunged to
US$29.9 mln (down 32.9% y/y and 47.8% compared to the target).
Total public debt declined 1.4% y/y to US$845.3 mln (approximately 76.1% of estimated 2017 nominal GDP) as at
September 2017 from US$857.7 mln (approximately 81.2% of 2016 nominal GDP) one year prior.

Outlook
In its October 2017 World Economic Outlook, the IMF projected that Grenada’s economy will likely expand by 2.3% in
2018 and average 2.5% thereafter. Annual inflation rates will likely remain just under 2% between 2018 and 2022, while
the IMF expects that the government will continue to produce fiscal surpluses above 2% of GDP through to 2021.
Consequently, government debt should continue to trend downward and reach below 70% of GDP by end-2018.

Chart 3 Chart 4
Public Sector Debt Outstanding Growth in Key Balances (%)

880 (US$mln) 8
Loans
6 Deposits
870
4
860
2
850 0
840 -2
-4
830
-6
820 -8
810 -10
2013Q3 2014Q3 2015Q3 2016Q3 2017Q3 2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 42

Jamaica Shane Lowe


CIBC FirstCaribbean
Production, Prices, and Employment
The Planning Institute of Jamaica estimated that greater output in the goods-producing and services sectors expanded
real GDP 1.1% y/y during Q4 2017. For the entire calendar year, economic activity increased by 0.5% y/y over the period.
 Greater output in mining and quarrying, and construction more than offset a persistent decline in agriculture,
forestry and fishing production to lift value added in goods-producing sectors 1.2% higher y/y during Q4 2017.
Mining and quarrying output benefited from greater alumina and bauxite production, while construction value
added increased on account of greater government capital expenditure and other domestic, non-residential
construction activity. In contrast, agriculture production continued to suffer from the effects of adverse weather
conditions experienced in May 2017.
 Similarly, output in services increased 1.0% y/y during the quarter due to greater production in all sectors. Greater
tourism output (up 5.7% y/y) benefited from strong growth in stay-over arrivals (up 12.7% y/y) and visitor
expenditure (up 17.7% y/y). Electricity and water supply expanded due to greater water and electricity output,
while transportation, storage and communication benefited from stronger stay-over and cruise arrivals during the
quarter.
 Having increased by 7.8% y/y during 2017, initial data for 2018 point to a 4.7% y/y rise in stay-over arrivals during
January 2018. Arrivals from the Caribbean and Asia contracted 1.7% y/y and 13.6% y/y, but the number of visitors
from the USA, Canada, Europe, Latin America and other markets advanced 7.2% y/y, 2.0% y/y, 0.7% y/y, 15.1%
y/y, and 0.8% y/y, respectively. Similarly, the number of cruise visitors increased 21.3% y/y in January 2018 after
a 16.2% y/y rise during 2017.
A 2.2% y/y rise in employment reduced the unemployment rate to 10.4% as at October 2017 from 12.9% twelve months
prior. Employment in financial intermediation, transport, storage and communication, and construction increased 6.2% y/y,
8.4% y/y, and 4.8% y/y, respectively, but the number of persons employed in hotels and restaurants declined 0.7% y/y.
Meanwhile, the size of the labour force declined 0.5% y/y to 1,347,600 persons. The number of persons in the labour
force aged 14 – 24 declined 4.3% y/y to 212,200 persons.
Consumer prices increased 4.4% y/y in February 2018. The prices of food and non-alcoholic beverages, and housing,
water, gas, electricity and other fuels increased 5.4% y/y and 5.6% y/y, while the cost of communication increased 0.3%
y/y.

Developments in Financial Markets


Since the Jamaica National Bank commenced commercial banking operations in February 2017, the Jamaica Money
Market Brokers (a much smaller institution) started commercial banking operations in August 2017. Since August 2017,
commercial bank loans remained relatively stable and deposits expanded over the four months ended December 2017.
 Commercial bank loans declined 0.2% between August 2017 and December 2017. Loans to domestic individuals
increased 5.8%, while lending to the corporate sector and non-residents declined 5.6%.
 Total deposits increased 5.6% over the same period. Resident retail and corporate deposits increased 7.2% and
5.7%, but non-resident deposits fell 3.3%.
The rate paid on the government of Jamaica’s 90-day Treasury Bill declined to 4.63% as at December 2017, down from
5.68% twelve months earlier.
The Bank of Jamaica’s net international reserves increased 21.6% y/y to US$3.18 bln (23.1 weeks of import cover) by
February 2018. Additionally, the JMD/US$ remained stable between February 2017 and February 2018, having
appreciated by 2.7% y/y during 2017 and depreciated by 2.5% over the two months since December 2017.
Loan quality and capital adequacy both improved y/y during Q3 2017. The commercial bank non-performing loans to total
loans ratio declined 0.3 percentage points y/y to 2.5%, while the capital adequacy ratio increased from 13.7% to 14.5%
over the same period.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 43

Government Debt
Faster growth in revenue than expenditure reduced the overall fiscal deficit by 88.6% y/y to US$26.0 mln during April
2017 to January 2018.
 The government collected US$309.2 mln more y/y in revenue to US$3.40 bln. Tax revenues, non-tax revenues
and capital revenues increased US$215.2 mln (7.6% y/y), US$106.3 mln (56.8% y/y), and US$13.2 mln (331.1%
y/y), but the bauxite levy and grants fell US$14.4 mln (93.6% y/y) and US$11.1 mln (28.3% y/y).
 Total spending increased US$106.8 mln y/y to US$3.42 bln. Higher spending on programmes (up US$85.2 mln
y/y), wages and salaries (up US$51.0 mln y/y) and capital projects (up US$9.1 mln y/y) outpaced a US$38.5 mln
(4.2% y/y) fall in interest expense.
Latest data sourced from the Bank of Jamaica points to a 2.1% y/y fall in the stock of debt to US$14.5bln by December
2017. Total internal debt declined 14.2% y/y to US$5.30bln, while the stock of direct externally-issued debt increased
6.5% y/y to US$9.20bln.
st
On January 31 2018, Fitch Ratings affirmed the Government of Jamaica’s ‘B’ rating on its sovereign debt and revised the
th
outlook from stable to positive. Further, on March 9 2018, the IMF announced completion of the third review under
Jamaica’s Stand-By Arrangement. The IMF highlighted that the government achieved progress on macroeconomic
policies and outcomes, but economic growth and progress on social outcomes have been weak.

Outlook
In its last published forecasts under the second IMF review associated with the Stand-By Arrangement, the IMF projected
that real GDP would increase by 1.9% y/y during 2018/19. However, in its most recent review, the IMF suggests that
creating an enabling environment for private sector investment is necessary to foster inclusive economic growth.
Moreover, with inflation rates likely to remain at the lower-end of the central bank’s target range, the IMF expects that a
less tight monetary stance will remain appropriate for the foreseeable future.

Chart 1 Chart 2
Key Economic Indicators (%) Inflation (y/y%)

3 20
25 All Items
2 15 Food
Housing, Utilities & Other Fuels
1 10
15
0 5

-1 0 5

-2 -5
Real GDP Growth (L) -5
-3 -10
Tourist Arrivals (R)
-4 Unemployment Rate (R) -15 -15
2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18

Source: Planning Institute of Jamaica, Bank of Jamaica, Caribbean Tourism Organization and CIBC Source: Bank of Jamaica and CIBC FirstCaribbean.
FirstCaribbean.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 44

Chart 3 Chart 4
Foreign Direct Investment and Remittances Developments in Credit Market Indicators (%)
1,800 (US$mln) Direct Investment (Jan-Sep) 14
Loan Growth
1,600 Net Remittance Inflows (Jan-Sep) 12 NPLs/Total Loans
1,400 10
1,200 8
1,000 6
800 4
600 2
400 0
200 -2
0 -4
2012 2013 2014 2015 2016 2017 2012Q3 2013Q3 2014Q3 2015Q3 2016Q3 2017Q3

Source: Bank of Jamaica and CIBC FirstCaribbean. Source: Bank of Jamaica and CIBC FirstCaribbean.

Chart 5 Chart 6
US$JMD Exchange Rate Developments in Capital Market Indicators

135 350,000 Index Value JSE Index (L) 10%


130 3-month T-bill Rate (R)
300,000
125
250,000 8%
120
115 200,000
110
150,000 6%
105
100 100,000
95
50,000 4%
Mar-14 Sep-14 Mar-15 Aug-15 Feb-16 Aug-16 Jan-17 Jul-17 Jan-18
Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18

Source: Bank of Jamaica and CIBC FirstCaribbean. Source: Bank of Jamaica and CIBC FirstCaribbean.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 45

Panama Luis Hurtado


CIBC Macro Strategy
Production, Prices, and Employment
Q4 2017 GDP increased 4.9% y/y, decelerating from the 6.1%, 5.25%, and 5.36% growth rates of Q1, Q2, and Q3. With
this number, 2017 growth landed at 5.4%, 0.4 percentage points above the 5.0% posted in 2016. 2017 growth was driven
by the positive performance of activities related to external sectors. Among them, the Panama Canal as well as air and
financial services stood out. Of the activities linked to the local economy, mining and quarrying (up 8.3%), construction (up
8.3% y/y), and transport, storage and communications (up 10.1%) had the highest growth rates in 2017. On the other
hand, fishing remained in negative territory with a 2.7% decline.
 Transport, storage, and communications increased 7.01% y/y in Q4, down from the 13.35% y/y and 11.62% y/y
posted in Q2 and Q3 2017, respectively. With these numbers, the sector grew 10.1% in 2017. The expansion of
the canal drove major increases in 2017 canal operations, which expanded 16.1%, as toll revenues jumped
17.6% y/y and services to ships in transit surged 9.1% y/y.
 Construction increased 5.94% y/y in Q4, decelerating from the 10.73% y/y and 10.53% y/y increases in Q2 and
Q3. Despite the deceleration in Q4, construction’s growth rate in 2017 increased 0.4 p.p. to 8.3%. Public and
private infrastructure projects grew 11% y/y, while residential, and non-residential construction rose 11.3% and
12.3%.
 The exploitation of mines and quarries recorded a growth rate of 8.3%, while education increased 7.8% driven by
the growth of income received in private education at high school and university levels.
 Among the sectors with a more moderate rate of growth in 2017, the financial intermediation, real estate activities,
utilities, and wholesale and retail sectors grew 5.0%, 3.6%, 3.6%, and 3%, respectively. Out of the 16 sectors,
fishing (down 2.7%) was the only one to post a decline in 2017.
February inflation came in at 0.3% m/m or 0.4% y/y, below the 0.3% m/m (0.8% y/y) recorded in September. Education
and restaurants and hotels, which were up 3.8% y/y and 2.9% y/y, contributed the most to the yearly increase in prices in
February. However, food and non-alcoholic beverages (largest weight in the goods basket) prices dropped 1.7% y/y.
Exports improved in 2017 increasing 3.75%, up from the 8.48% decline posted in 2016. Imports also posted a positive
performance growing 8.78%, up from the 3.56% drop in 2016. In line with the trade balance results, the current account
deficit came in at 5.65% of GDP, or 18 p.p. higher than the 5.47% deficit posted in 2016.
In August 2017, the unemployment rate came in at 6.1% increasing from the 5.5% posted in August 2016, while
employment increased to 1.79mln (up 15k) and the participation rate remained unchanged at 64%, slightly dropping from
the 64.4% recorded in August 2016.
Table 1 Chart 1
Key Economic Indicators & Forecast Real GDP (y/y; %)
Key Annual Indicators 2014E 2015 2016F 2017 2018F 5.0%
Real GDP Growth* 6.1% 5.8% 5.0% 5.4% 5.6%
Inflation (End of Period) 1.0% 0.3% 1.5% 0.5% 1.2% 4.0%
Adj. NFPS Fiscal Balance (% GDP) -1.5% -1.0 -1.0% -1.0% -0.5%
Nom. NFPS Fiscal Balance (% GDP) -3.2 -2.8 -1.9% -1.7% -1.2% 3.0%
Current Account (% of GDP) -9.6% -7.9% -5.5% -5.7% -5.5%
Public Sector Debt/GDP 37.1% 39.1% 39.5% 39.9% 39.5% 2.0%

1.0%

0.0%

-1.0%
Jan-13 Aug-13 Apr-14 Dec-14 Jul-15 Mar-16 Nov-16 Jul-17 Feb-18

Source: Ministerio de Hacienda, IMF and CIBC World Markets Source: Bloomberg

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 46

Government Debt
Central government revenue came in at US$8.6bln (up 11.5%). Tax revenue increased 1.6% to US$5.7bln, while non-tax
income rose 38.5% or US$806mln to US$2.9bln. On the expenditure front, central government total expenses reached
US$10.4bln, increasing 5.1%. Current expenses increased 8.5% to US$6.5bln, as personnel services, goods and
services, and transfers grew 12.6%, 7.3% and 0.8%, respectively. Capital expenses dropped US$16mln or 0.4% to
US$3.7bln. The central government nominal deficit came in at US$1.82bln or 3.1% of GDP, down from the 4.0% deficit
posted in 2016.
With these numbers, the 2017 Non-Financial Public sector (NFPS) revenues came in at US$12.4bln, up US$785mln
(+6.7%) from 2016. Total expenses increased US$736mln or 5.8% to US$13.4bln, while current savings reached
US$2.8bln (+0.9%). Hence, the nominal NFPS deficit came in at US$1bln or 1.7% of GDP, improving from the 1.9%
deficit posted in 2016. Looking at the adjusted balance (transfer from the Canal of Panama), the NFPS posted an
adjusted nominal deficit of 1.0%.
As of January 31, 2018, total public debt reached US$23.38bln or 39.9% of GDP. External debt at US$ 18.37bln and
internal debt at US$5.0bln accounted for 78.56% and 21.44% of total debt.

Outlook
We maintain our 5.6% economic growth forecast for 2018 with an upward bias. This is based on the continuous positive
contribution of activities along the Canal, the development of high-income tourist facilities, the expansion of the energy
sector, and increasing exports. On the Fiscal front, we expect the government to comply with the FRL and post an
adjusted deficit of 0.5% of GDP in line with the medium-term fiscal framework thanks to the ACP dividend. According to
the estimated budget, the Canal of Panama will contribute US$1.66bln and US$225mln directly and indirectly (through
tolls and services) to treasury. This represents a 17.7% y/y increase.

Chart 2 Chart 3
Inflation (y-o-y; %) Government Debt and Deficits

5.0% Nominal Govt. Bal. (%GDP, L)


4 80
Govt. Debt (% GDP, R)
4.0% 70
2
60
3.0%
0 50
2.0% 40
-2 30
1.0%
20
0.0% -4
10
-1.0% -6 0
Jan-13 Aug-13 Apr-14 Dec-14 Jul-15 Mar-16 Nov-16 Jul-17 Feb-18 36494 37590 38686 39782 40877 2018F

Source: Central Bank of Costa Rica. Source: IMF, CIBC World Markets.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 47

St. Kitts and Nevis Shane Lowe


CIBC FirstCaribbean
Production, Prices, and Employment
Economic growth decelerated, but remained positive during the first three quarters of 2017.
 Tourism value added improved y/y year-to-date through September 2017. Stay-over arrivals declined 3.3% y/y as
arrivals from all major source markets declined. Arrivals from the USA, Canada, the UK, Caribbean, and all other
markets contracted 3.6% y/y, 3.8% y/y, 2.9% y/y, 2.2% y/y, and 4.2% y/y, respectively. The number of
excursionists also declined 9.9% y/y, but the number of yacht passengers surged 41.9% y/y, while cruise visitors
– which accounted for 89% of total arrivals during the period – advanced 12.7% y/y. Consequently, total visitor
arrivals and spending rose 10.9% y/y and 12.0% y/y.
 Despite available indicators suggesting mixed views about construction performance, the ECCB estimates that
both private and public sector construction boosted total construction value added. The volume of construction
material imports declined by 7.0% y/y compared to a 41.3% y/y plunge one year earlier, while commercial bank
credit to construction companies declined 3.0% year-to-date. However, banks’ lending to individuals for home
construction and renovation, the volume of sand mined from the government’s quarry, and the volume of stones
mined increased 0.9%, 5.3% y/y and 1.4% y/y — all year-to-date through September 2017. Private sector activity
focused primarily on tourism-related work, while a 30.2% y/y surge in capital expenditure highlighted the
government’s contribution to greater construction activity.
 Similarly, manufacturing output benefited from a surge in the exports of electronic components and an 8.5% y/y
rebound in beverage exports. Meanwhile, despite declines in the production of beef (down 16.6% y/y) and pork
(down 0.5% y/y), greater production of onions and cucumbers (both more than doubled), pumpkins (up 12.7%
y/y), watermelons (up 14.6% y/y), sweet peppers (up 22.0% y/y), tomatoes (up 6.7% y/y), carrots (up 5.2% y/y),
peanuts (up 34.0% y/y), and eggs (up 2.4% y/y) boosted agriculture value added over the same period.
Higher prices for transportation (up 6.8% y/y) and housing, utilities, gas and fuels (up 0.1% y/y) and no change in the
prices of food and non-alcoholic beverages contributed to a 0.6% y/y rise in consumer prices during September 2017.

Developments in Financial Markets


Continuous loan growth and negative deposit growth reduced high banking sector liquidity y/y during 2017. However,
while banks have increased their capital buffers, non-performing loans have surged and profitability has declined
marginally.
 Commercial bank loans increased 1.4% y/y as a 2.2% y/y rise in loans to residents more than offset a 7.6% y/y
decline in non-resident loans. Lending to businesses fell 1.0% y/y, but loans to the public sector, mortgages and
lending to consumers increased 11.5% y/y, 0.3% y/y and 1.2% y/y.

Chart 1 Chart 2
Stay-Over Tourist Arrivals Inflation (y/y; %)

1,500 (US$/person) (000's) 118 10


1,400 116
5
1,300 114
112 0
1,200
110
1,100 All Items
-5
108 Food
1,000
106 -10 Fuel and Light
900 104
Visitor Expenditure/person (L) -15
800 102
Stay-Over Arrivals (R)
700 100 -20
Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 48

 Notwithstanding a 4.0% y/y expansion in savings deposits, declines in demand deposits (down 4.8% y/y), time
deposits (down 1.4% y/y) and foreign currency deposits (down 13.3% y/y) reduced total deposits by 3.8% y/y.
 Consequently, the loan-to-deposit ratio increased from 37.7% to 39.8% between December 2016 and December
2017. However, declines in the weighted average lending rate (down 15 bps y/y to 8.41%) and the weighted
average deposit rate (down 8 bps y/y to 1.77%) reduced the average interest rate spread by 7 bps y/y to 6.64%.
 While the banking sector’s capital adequacy ratio increased 4.7 percentage points y/y to 27.4% during Q4 2017,
the return on assets declined 0.1 percentage points y/y to 0.8% and the non-performing loans ratio surged 5.8
percentage points y/y to 20.5%.
Government Debt
Greater spending and lower revenue collections further reduced the government’s fiscal surplus by 48.4% y/y to US$23.1
mln during the first nine months of 2017.
 The government collected US$10.0 mln less (4.8% y/y) in current revenue during the period. Tax revenue
declined US$0.4 mln y/y to US$132.2 mln, as declines in taxes on property (down US$0.9 mln y/y), and taxes on
domestic goods and services (down US$2.3 mln y/y) eclipsed greater collections of taxes on income and profits
(up US$1.9 mln y/y) and taxes on international trade and transactions (up US$1.0mln y/y). Non-tax revenue
continued to trend downward and fell US$9.7 mln y/y to US$68.4 mln as the government attracted less
Citizenship-by-Investment inflows. On the other hand, total capital revenue and total grants increased US$0.9 mln
y/y and US$3.5 mln y/y to US$2.2 mln and US$21.2 mln, respectively.
 Except for a US$2.1 mln (5.3% y/y) fall in spending on goods and services, higher spending on personal
emoluments (up US$0.3 mln y/y), interest on debt (up US$2.2 mln y/y) and transfers and subsidies (up US$0.4
mln y/y) increased total current expenditure US$0.8 mln y/y to US$168.5 mln. Capital expenditure and net lending
surged US$15.3 mln y/y to US$32.3 mln.
While the government continued to produce a fiscal surplus, the government’s stock of public debt increased 1.0% y/y to
US$584.2 mln (61.4% of 2017 projected GDP) at the end of September 2017.

Outlook
The Eastern Caribbean Central Bank projects that faster growth in construction, tourism, agriculture and manufacturing
will likely accelerate growth in economic activity to 4.0% in 2018. However, despite a persistent decline in Citizenship-by-
Investment inflows, a recent rebranding of the programme and a reduction in the price of entry may boost inflows in the
medium-term and provide material benefits to both construction activity and the government’s revenue intake.

Chart 3 Chart 4
Public Sector Debt Outstanding Growth in Key Balances (%)

900 (US$mln) 25 Loans


800 20
Deposits
700 15
10
600
5
500 0
400 -5
300 -10
200 -15
-20
100
-25
0 -30
2013Q3 2014Q3 2015Q3 2016Q3 2017Q3 2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 49

St. Lucia Shane Lowe


CIBC FirstCaribbean
Production, Prices, and Employment
Strong performances in tourism and construction suggest that real GDP expanded y/y during the nine months ended
September 2017.
 Strong growth in both stay-over arrivals (up 9.3% y/y) and cruise ship arrivals (up 18.9% y/y) boosted tourism
activity y/y. Stay-over arrivals from all major markets increased — the number of visitors from the USA, Canada,
the UK, the Caribbean and other markets expanded 6.2% y/y, 12.6% y/y, 10.3% y/y, 7.6% y/y, and 31.0% y/y,
respectively. Therefore, despite declines in the number of excursionists (down 29.9% y/y) and the number of
yacht passengers (down 14.4% y/y), total tourist arrivals and tourist expenditures advanced 12.6% y/y and 14.2%
y/y.
 Construction value added benefited from growth in both the private and public sectors. Private sector activity
depended primarily on work on tourism-related projects, while a 16.6% y/y rise in public capital expenditure points
to greater contribution from the government over the same period. Further, despite a 6.0% year-to-date decline in
lending to construction companies, a 6.7% year-to-date rise in lending to individuals for home construction and
renovation provide further evidence of greater construction activity during the period.
 Nonetheless, both manufacturing and agriculture output fell y/y over the three quarters ended Q3 2017. Declines
in the values of domestic exports of manufactured goods (down 22.0% y/y) and chemicals and related products
(down 5.8% y/y) imply weaker manufacturing GDP, while despite an increase in production of pork, lower
production of bananas (down 8.3% y/y), chicken and eggs reduced agriculture output.
Consumer prices fell marginally by 0.3% y/y in September 2017. The prices of food and non-alcoholic beverages
remained stable while the prices of transportation, and housing, utilities, gas and fuels increased 4.7% y/y and 2.7% y/y. In
contrast, the prices of clothing and footwear, and health contracted 13.5% y/y and 0.9% y/y.

Developments in Financial Markets


While loan balances continued to trend downward, banking sector liquidity, loan quality, profitability and capital adequacy
all increased y/y in Q4 2017.
 Greater retail loans (up 11.2% y/y) combined with a 12.6% y/y decline in corporate loans to reduce total loans by
1.2% y/y. Mortgages, consumer loans, and public sector loans increased 5.1% y/y, 19.2%, and 12.2% y/y,
respectively, but business loans declined 15.5% y/y.
 Total deposits increased 3.9% y/y. Demand, savings and foreign currency deposits increased 17.6% y/y, 1.6% y/y
and 9.2% y/y, but time deposits fell 7.1% y/y.

Chart 1 Chart 2
Stay-Over Tourist Arrivals Inflation (y/y; %)

1,500 (US$/person) 380 (000's) 20 All Items Food Utilities and Housing
1,400 370
15
360
1,300
350 10
1,200 340 5
1,100 330
320 0
1,000
310 -5
900
300
Visitor Expenditure/person (L) -10
800 290
Stay-Over Arrivals (R)
700 280 -15
Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 50

 The banking sector loan-to-deposit ratio fell from 87.8% to 83.5%, while the average interest rate spread fell
1 basis point y/y as average lending and deposit rates fell 16 bps y/y to 7.99% and 15 bps y/y to 1.47%.
 Return on assets increased from -0.3% to 1.2% between Q4 2016 and Q4 2017, while the non-performing loans
ratio declined 0.6 percentage points y/y to 12.5%. Further, the regulatory capital to risk-weighted assets ratio
increased from 11.8% to 18.2% over the same period.
Government Debt
Faster growth in expenditure than in revenue reduced the government’s overall fiscal balance from a US$4.2 mln surplus
during January – September 2016 to an overall deficit of US$16.9 mln one year later.
 Current revenue increased US$4.9 mln y/y to US$290.3 mln. Tax revenues increased marginally by US$0.3 mln
y/y to US$275.6 mln, as greater receipts from taxes on income and profits (up US$0.4 mln y/y), taxes on property
(up US$0.2 mln y/y) and taxes on international trade and transactions (up US$9.8 mln y/y) more than offset a
US$10.0 mln (8.4% y/y) drop in taxes on domestic goods and services. Further, unlike in the Northern Caribbean,
stronger Citizenship-by-Investment inflows lifted non-tax revenues US$4.6 mln higher y/y to US$14.7 mln. Total
grants received surged US$3.2 mln y/y to US$8.0 mln, but capital revenue fell from US$57k to US$19k.
 Current expenditure expanded US$22.7 mln y/y to US$269.6 mln. Spending on personal emoluments, goods and
services, interest payments, and transfers and subsidies all advanced US$0.6 mln (0.5% y/y), US$4.0 mln (8.8%
y/y), US$4.7 mln (11.1% y/y), and US$13.5 mln (25.0% y/y). Capital expenditure and net lending increased
US$6.5 mln y/y to US$45.6 mln.
Total public debt expanded 3.0% y/y to US$1.16 bln or approximately 67.7% of projected 2017 GDP.

Outlook
The ECCB projects that St Lucia’s economy will likely expand by 3% in 2018, led by strong growth in construction and
agriculture. Meanwhile, the IMF expects that the government’s fiscal deficit will likely narrow marginally in 2018 and the
government’s debt to GDP ratio will therefore likely decline to 66% of GDP by the end of the year. However, growing fiscal
deficits thereafter will likely put public debt on an upward trajectory in the medium-term.

Chart 3 Chart 4
Public Sector Debt Outstanding Growth in Key Balances (%)

1,200 (US$mln) 15 Loans

1,150 Deposits
10

1,100 5

1,050 0

1,000 -5

950 -10

900 -15
2013Q3 2014Q3 2015Q3 2016Q3 2017Q3 2012Q3 2013Q3 2014Q3 2015Q3 2016Q3 2017Q3

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 51

Sint Maarten Shane Lowe


CIBC FirstCaribbean
Production, Prices, and Employment
Damage inflicted by Hurricane Irma in September 2017 has prohibited the production of data on production, prices and
employment since then. However, qualitative data from the central bank suggests a substantial reduction in real GDP y/y
in 2017. The central bank estimates that real GDP declined by 4.4% y/y in 2017.
 Net foreign demand declined y/y during 2017 as a decline in exports of goods and services associated with lower
tourist arrivals outpaced the fall in imports associated with weaker private consumption and tourist spending.
Major tourism infrastructure, including most major hotels and the airport, suffered extensive damage and were
partially or fully closed to facilitate repairs or reconstruction. Thus, the boost in tourism generally expected during
the winter season could not materialise.
 Given Sint Maarten’s dependence on tourism for economic activity and foreign exchange earnings, the closure of
several hotels significantly increased the number of unemployed persons post-Irma. However, greater domestic
demand partially offset the decline in net exports as higher public consumption and private investment associated
with some rebuilding post-Irma eclipsed declines in the government’s level of investment and private consumption
associated with lower employment.
The central bank also estimates that average consumer prices increased 1.4% y/y during 2017.

Developments in Financial Markets


Strong deposit growth and a decline in commercial bank loans likely partially associated with weaker economic activity
post-Hurricane Irma increased commercial bank liquidity y/y during 2017.
 Commercial bank loans fell 0.9% y/y in December 2017. Loans to consumers, the public sector and to households
for mortgages increased 1.4% y/y, 74.9% y/y and 0.9% y/y, but lending to businesses declined 2.8% y/y.
However, much of the slowdown in lending occurred since the end of August after Hurricane Irma’s passage on
th
September 6 2017. Total loans declined 1.6% between August 2017 and December 2017, as business loans
and mortgages fell 2.5% and 0.5%, while loans to the public sector and consumers increased 3.6% and 0.1%.
 Total deposits continued to increase persistently during 2017 (up 13.6% y/y), even after the passage of Hurricane
Irma. Total resident retail and corporate deposits increased 17.4% y/y and 25.7% y/y, but non-resident deposits
fell 27.7% y/y.
 The loan-to-deposit ratio fell 9.9 percentage points y/y to 67.7%, but the yield on three-month government
Treasury Bills increased to -0.76% from -0.83%. Since then, the yield increased further to -0.59% in January
2018.

Chart 1 Chart 2
Key Economic Indicators (%) Inflation (y/y; %)

8 10
Tourist Arrivals All Items Food
7
6 8
5
6
4
3 4
2
1 2
0
0
-1
-2 -2
Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 52

The central bank’s net official reserves increased from US$1.69 bln to US$1.87 bln between December 2016 and
December 2017.

Government Debt
Pre-Irma, the government’s current fiscal surplus improved by US$21.9 mln y/y to US$36.3 mln during H1 2017.
 Total revenue increased US$23.0 mln y/y to US$155.9 mln. Revenues from taxes, concessions and fees,
licences, and other categories increased US$5.8 mln (5.1% y/y), US$1.6 mln (13.6% y/y), US$0.3 mln (8.1% y/y),
and US$15.4 mln (310.1% y/y).
 Current government spending rose US$1.1 mln y/y to US$119.6 mln. Spending on goods and services, and social
security expanded US$2.6 mln (12.6% y/y) and US$0.2 mln (2.8% y/y), while outlays on wages and salaries
remained unchanged y/y. However, expenditure on subsidies, interest payments, and other items fell US$0.6 mln
(2.0% y/y), US$0.1 mln (1.6% y/y), and US$1.0 mln (19.8% y/y).
Total public debt declined from 36.3% of GDP in Q2 2016 to 31.7% of GDP four quarters later.
Since then, the government of the Netherlands pledged €550 mln in aid to the government of Sint Maarten to assist in
funding reconstruction efforts. However, the Netherlands insisted on certain pre-conditions before funding was released,
including the establishment on an Integrity Chamber and strengthening of border controls.

Outlook
The Centrale Bank van Curaçao en Sint Maarten expects real GDP to decline by 9.5% y/y in 2018. Weaker foreign
exchange earnings from fewer tourist arrivals combined with greater imports associated with reconstruction efforts will
likely reduce net foreign demand, while domestic demand will likely increase due to greater private and public investments
and greater public consumption. Private consumption will likely decline in line with lower employment levels.

Chart 3
Developments in Credit Market Indicators
6 14

4 12

10
2
8
0
6
-2
4
-4 Loan Growth (L) 2
NPLs/Total Loans (R)
-6 0
2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 53

St. Vincent and the Grenadines Shane Lowe


CIBC FirstCaribbean
Production, Prices, and Employment
Unlike in the rest of the Eastern Caribbean Currency Union, economic activity in St. Vincent and the Grenadines declined
y/y during the first three quarters of 2017.
 Notwithstanding an increase in the number of excursionists (up 11.6% y/y), cruise ship passengers (up 40.0% y/y)
and yacht passengers (up 0.5% y/y), a 3.9% y/y fall in stay-over visitors reduced total visitor expenditure by 7.2%
y/y. Stay-over arrivals from the USA, Canada, Caribbean and other markets except the UK increased 1.6% y/y,
10.4% y/y, 2.9% y/y and 6.0% y/y, respectively, but the number of visitors from the UK contracted 31.3% y/y.
 Meanwhile a decline in public sector construction and slower growth in residential construction reduced overall
construction activity. The government’s capital expenditures declined 15.0% y/y as the Argyle International Airport
– a major source of construction in recent years – had come to completion, while commercial banks’ loans to
households to finance home construction and renovation increased 3.3% year-to-date compared to growth of
4.4% year-to-date over the same period twelve months prior.
 Finally, a 25.4% y/y plunge in banana production reduced agriculture output, while declines in the production of
beer (down 14.1% y/y), feeds (down 5.2% y/y), and flour (down 4.6% y/y) reduced total manufacturing value
added.
Consumer prices increased 1.9% y/y between September 2016 and September 2017. The price of food and non-alcoholic
beverages rose 3.3% y/y and transportation costs advanced 1.9% y/y. However, the price of housing, utilities, gas and
fuels declined 0.3% y/y.

Developments in Financial Markets


Stronger retail loan growth outpaced modest deposit growth thereby reducing liquidity in 2017 y/y. Capital adequacy
remains above the minimum required 8% threshold and the non-performing loans ratio has declined, but banking sector
profitability fell during Q4 2017.
 Bank loans increased 2.6% y/y. Mortgages and public sector loans increased 7.7% y/y and 19.4% y/y, but lending
to consumers and businesses fell 2.2% y/y and 6.8% y/y.
 Total deposits advanced 0.4% y/y. Savings deposits and foreign currency deposits increased 3.9% y/y and 2.8%
y/y, but demand deposits and time deposits contracted 2.7% and 10.5% y/y.
 Despite a reduction in banking sector liquidity, lending rates continued to fall. The weighted average lending rate
fell 32 bps y/y to 8.58, while the weighted average deposit rate remained stable at 1.82%.

Chart 1 Chart 2
Stay-Over Tourist Arrivals Inflation (y/y; %)

2,000 (US$/person) Visitor Expenditure/person (L) (000's) 82 8 All Items


Thousands

Stay-Over Arrivals (R) 80 6 Food


1,800
Fuel and Light
78 4
1,600
76 2
1,400 74 0
1,200 72 -2
70 -4
1,000
68 -6
800 66 -8
600 64 -10
Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 2012Q3 2013Q3 2014Q3 2015Q3 2016Q3 2017Q3

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 54

 Between Q4 2016 and Q4 2017, the banking sector capital adequacy ratio and return on average assets fell from
20.9% and 0.3% to 19.9% and -0.1%, but the non-performing loans to gross loans ratio also fell 1.4 percentage
points to 8.2%.
Government Debt
The government’s overall fiscal balance continued to worsen y/y during the first three quarters of 2017. The fiscal balance
worsened from a US$4.2 mln surplus during Q1 – Q3 2016 to a US$6.2 mln deficit a year later.
 Current revenue increased US$4.4 mln y/y to US$156.1 mln. Non-tax revenue declined US$1.4 mln y/y to
US$19.6 mln, but higher collections increased tax revenue by US$5.8 mln y/y to US$136.5 mln. Taxes on income
and profits, taxes on property, and taxes on goods and services advanced US$0.5 mln (1.2% y/y), US$5.1 mln
(49.6% y/y), and US$1.7 mln (2.6% y/y), but taxes on international trade contracted US$1.5 mln (8.7% y/y).
However, capital revenue and grants plunged 44.3% y/y to US$6.9 mln.
 All categories of current expenditure increased y/y. Spending on employee compensation, spending for the use of
goods and services, interest payments, and transfers increased US$1.4 mln (1.8% y/y), US$0.6 mln (3.7% y/y),
US$0.9 mln (8.1% y/y), and US$4.8 mln (13.6% y/y). Capital expenditure on the other hand fell US$2.6 mln y/y to
US$14.7 mln.
The government’s worsening fiscal balance coincided with a rising debt stock. Total public debt increased 2.6% y/y to
US$648.5 mln (82.8% of 2017 projected GDP) between Q3 2016 and Q3 2017.

Outlook
The ECCB projects a 1.9% y/y rebound in real GDP during 2018 after a likely 0.7% y/y contraction one year prior. This
recovery will likely depend on improved developments in wholesale and retail trade, manufacturing, tourism and
construction.
Further, the IMF expects that the government’s overall fiscal deficit will likely fall marginally during 2018 and 2019, while
the public debt to GDP ratio will likely peak in 2019, before trending downward thereafter.

Chart 3 Chart 4
Public Sector Debt Outstanding Growth in Key Balances (%)

700 (US$mln) 8 Loans


7
650 Deposits
6
5
600
4
550 3
2
500 1
0
450
-1
400 -2
2013Q3 2014Q3 2015Q3 2016Q3 2017Q3 -3
2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 55

Suriname Shane Lowe


CIBC FirstCaribbean
Production, Prices, and Employment
Preliminary data from the Centrale Bank van Suriname suggest that net external demand and domestically-financed
investment likely improved in 2017.
 A US$480.0 mln improvement in the balance of goods traded reversed the balance on the external current
account from a US$144.8 mln deficit over the three quarters ended Q3 2016 to a US$258.2 mln surplus over the
same period a year later. A 48.4% y/y recovery in earnings from the export of goods and a 0.2% y/y fall in goods
imports improved the balance of goods traded to US$523.9 mln (from US$43.9 mln) and offset declines in the
balances on the services (down US$37.6 mln y/y), income (down US$33.6 mln y/y), and current transfers (down
US$5.8 mln y/y) accounts.
 Strong growth in public sector capital expenditure over the first eight months of 2017 (up 111.9% y/y) and a 2.9%
y/y expansion in total retail and commercial mortgages over the twelve months ended December 2017 offset a
US$261.4 mln y/y decline in foreign direct investment over the first three quarters of 2017.
Consumer price inflation continued to fall and declined to 9.0% y/y in January 2018 compared to 48.7% y/y during January
2017.

Developments in Financial Markets


Positive expansion in government lending and consumer loans increased total loans and advances y/y during January
2018.
 Local currency loans increased 13.3% y/y as growth in public sector loans (up 77.7% y/y), consumer loans (up
10.8% y/y), and retail mortgages (up 0.2% y/y) eclipsed a 3.2% y/y decline in business loans.
 Foreign currency loans rose 6.5% y/y. A 70.8% y/y surge in public sector borrowing and a 0.7% y/y rise in
business loans more than offset declines in retail mortgages (down 14.3% y/y) and the small consumer loans
segment (down 6.1% y/y).
Deposits denominated in local and foreign currencies expanded 11.6% y/y and 7.1% y/y in January 2018.
Rising weighted average SRD deposit rates (up 20 bps y/y to 9.10%) and falling weighted average SRD lending rates
(down 40 bps y/y to 14.30%) narrowed the weighted average interest rate spread 60 bps y/y to 5.20%.

Chart 1 Chart 2
Real GDP (%) Inflation (y/y; %)

8 90

6 80
70
4
60
2 50
0 40

-2 30
20
-4
10
-6 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18
\

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 56

Notwithstanding the significant improvement in the external current account balance, less net foreign direct investment
inflows (down US$261.4 mln y/y) contributed to a US$369.8 mln y/y fall in the financial account balance to a US$61.2 mln
deficit during Q1 – Q3 2017.
International reserves continued to recover and increased 11.5% y/y to US$444.6 mln (approximately 13.4 weeks of
imports of goods and services) during January 2018. Thus, the SRD/US$ depreciated 0.6% y/y during January 2018, but
subsequently appreciated 1.0% y/y one month later to 7.47:1.
Government Debt
Weaker revenues and greater spending increased the government overall fiscal deficit by 24.6% y/y to US$194.9 mln
during the first eight months of 2017.
 Declines in both taxes (down US$15.6 mln y/y to US$269.7 mln) and non-tax revenues (down US$6.2 mln y/y to
US$101.3 mln) reduced total revenues by US$21.8 mln y/y to US$371.0 mln. Direct taxes increased US$32.1 mln
y/y to US$156.8 mln, but indirect taxes fell US$47.8 mln y/y to US$112.9 mln.
 Current expenditure contracted US$28.7 mln y/y to US$479.9 mln. Spending on wages and salaries, other goods
and services, and subsidies declined US$27.1 mln (13.8% y/y), US$5.9 mln (5.8% y/y), and US$22.0 mln (12.5%
y/y), but interest on debt surged US$26.2 mln (75.2% y/y). Capital expenditure also ballooned US$45.4 mln y/y to
US$86.0 mln.
Total government debt increased 1.8% y/y to US$2.41 bln as at December 2017.
After placing the government of Suriname’s B1 rating on review for downgrade, Moody’s then downgraded the country’s
rating to B2 with a negative outlook. Moody’s cited the deteriorating fiscal position as the main reason for its rating action.

Outlook
The IMF expects that economic activity will likely expand by 1.2% in 2018 and slowly accelerate thereafter. Further, the
IMF now expects growth in consumer prices to accelerate to 12.3% y/y by the end of 2013, while unemployment will likely
fall to 8.8% over the same period. The IMF expects that the fiscal deficit will improve to 4.9% of GDP in 2018 and
gradually decline thereafter, while government debt will peak in 2018 before it returns to a downward trajectory. Finally,
the IMF projects that, having likely produced an external account surplus of 9.4% of GDP in 2017, the external surplus will
fall to 6.1% of GDP in 2018.

Chart 3 Chart 4
Growth in Key Balances (%) Interest Rates (%)

30 Loans 16
20 Deposits
14
10
0 12

-10 10
-20
8
-30
-40 6 Weighted Average Lending Rate
Weighted Average Deposit Rate
-50 4
Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18

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

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 57

Trinidad and Tobago Shane Lowe


CIBC FirstCaribbean
Production, Prices, and Employment
Recent estimates from the Central Bank of Trinidad and Tobago (CBTT) suggest that energy output rebounded 13.5% y/y
during Q3 2017, while the decline in non-energy production slowed to just 1.9% y/y over the same period. Since then,
preliminary data suggest that while energy production improved y/y during 2017, non-energy output may have bottomed
out during the year.
 During Q3 2017, greater production of crude oil (up 3.8% y/y), natural gas (up 13.7% y/y), liquefied natural gas
(up 23.9% y/y) and methanol (up 25.2% y/y) contributed to the 13.5% y/y rise in energy production. Since then,
production of crude oil, natural gas, liquefied natural gas, and methanol all increased 0.2% y/y, 1.2% y/y, 2.7%
y/y, and 6.9% y/y, respectively, compared to declines across all four categories registered during H1 2017.
However, ongoing production challenges at Petrotrin reduced crude oil refinery throughput by 12.0% y/y during
the year. Further, an 11.5% y/y rise in depth drilled and a 4.3% y/y contraction in the number of rig days imply
mixed prospects for greater energy production in the near- to medium-term.
 Weaker activity across most major sectors contributed to the 1.9% y/y fall in non-energy sector output during Q3
2017. Activity in the finance, insurance and real estate sector declined 1.0% y/y, while distribution, manufacturing,
transportation, and electricity and water production contracted 3.6% y/y, 0.5% y/y, 0.8% y/y, and 0.1% y/y,
respectively. Further, a 6.6% y/y increase in the sales of mined aggregates (up 6.6% y/y) contrasted with a 4.0%
y/y decline in the local sales of cement and suggests that construction activity remained weak during the quarter.
Since then, available indicators suggest that, while non-energy production remained weak in 2017, the distribution
sector may have rebounded during January 2018. The sale of new motor vehicles, local production of cement and
local sales of cement all declined 12.7% y/y, 7.1% y/y, and 5.1% y/y during 2017. However, much stronger sales
of new commercial (up 75.4% y/y and 10.0% relative to January 2016) and private (up 42.6% y/y and 10.7%
relative to January 2016) vehicles during January 2018 imply some rebound in distribution so far in 2018.
The rate of inflation declined from 3.6% y/y during January 2017 to 0.9% y/y twelve months later.
While the size of the labour force declined 0.3% y/y in Q1 2017, a 1.1% y/y drop in employment and a 20.7% y/y rise in
unemployment increased the unemployment rate by 0.7 percentage points y/y to 4.5%.

Developments in Financial Markets


Stronger corporate and retail loans reversed the downward trend in banking sector loans during 2017, while loan quality
also improved during the year.

Chart 1 Chart 2
Key Economic Indicators (%) Key Commodity Prices (US$)
10 120 7

5 100 6

0 5
80
4
-5 60
3
-10 40
2
-15 Real GDP Growth 20 Crude Oil price/ barrel (Brent; L) 1
Crude Oil Production Natural Gas price/million metric (Henry Hub; R)
-20 Liquefied Natural Gas Production 0 0
2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18

Source: Central Bank of Trinidad and Tobago and CIBC FirstCaribbean. Source: International Monetary Fund and CIBC FirstCaribbean.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 58

 Banking sector loans increased 4.5% y/y as increases in mortgages (up 7.8% y/y), consumer loans (up 2.3% y/y)
and business loans (up 4.2% y/y) eclipsed a 6.1% y/y fall in public sector loans.
 Commercial bank non-performing loans to gross loans declined from 3.1% at December 2016 to 2.9% twelve
months later.
Declines in demand (down 0.9% y/y), savings (down 3.7% y/y), time (down 0.2% y/y) and foreign currency (down 1.4%
y/y) deposits reduced total deposits by 2.1% y/y.
The Trinidad and Tobago stock composite price index advanced 2.5% y/y during February 2018.
Notwithstanding higher energy production and prices, the Central Bank of Trinidad and Tobago’s net official FX reserves
declined 11.0% y/y to US$8.09 bln (9.2 months of imports) during February 2018. However, the TTD/US$ exchange rate
remained stable at 6.78:1 over the same period.
Government Debt
Greater current energy and non-energy revenue combined with lower current and capital expenditure narrowed the
government fiscal deficit from US$373.5 mln during October – December 2016 to US$33.7 mln over the same period a
year later.
 Total revenue increased US$125.7 mln y/y to US$1.33 bln. Greater petroleum prices and natural gas production
contributed to a US$152.3 mln y/y surge in current energy revenue to US$326.3 mln, but less sales of CL
Financial assets reduced capital revenue from US$88.1 mln to US$1.1 mln. Further, current non-energy revenue
increased US$60.4mln y/y to US$1.01 bln, as greater receipts from taxes on income (up US$38.9 mln y/y), taxes
on property (up US$28k y/y), and taxes on goods and services (up US$103.4 mln y/y) eclipsed declines in taxes
on international trade (down US$9.5 mln y/y) and non-tax revenues (down US$72.5 mln y/y).
 However, lower spending in all major categories except interest payments reduced total expenditure by US$214.1
mln y/y to US$1.37 bln. Current spending fell US$182.1 mln y/y to US$1.35 bln as outlays on wages and salaries
(down US$20.4 mln y/y), goods and services (down US$54.8 mln y/y) and transfers and subsidies (down
US$119.8 mln y/y) more than offset a US$12.9 mln (15.8% y/y) increase in interest payments. Capital expenditure
and net lending plunged US$32.0 mln y/y to US$17.3 mln.
Total gross public sector debt declined from 80.1% of GDP in Q4 2016 to 77.5% of GDP four quarters later. Central
government external debt as a percentage of GDP increased 0.9 percentage points y/y to 15.3%, but the central
government domestic debt to GDP ratio and total contingent liabilities debt to GDP ratio both fell 2.1 percentage points y/y
and 1.3 percentage points y/y to 43.2% and 19.0%.

Outlook
The Central Bank of Trinidad and Tobago projects that real GDP will likely benefit from stronger energy and non-energy
performances during 2018. Energy production should benefit from greater natural gas production and greater average oil
prices relative to one year earlier, while stronger energy output and increased demand for manufactured imports from the
rest of the Caribbean Community (CARICOM) should lift non-energy sector output during the near-term.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 59

Chart 3 Chart 4
Inflation (y/y; %) Developments in Credit Market Indicators

20 All Items
20 8
Loan Growth (L)
18
Food 15 NPLs/Total Loans (R)
16
6
14
10
12
10 5 4
8
6 0
4 2
2 -5
0
-10 0
Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18
2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q4

Source: Central Bank of Trinidad and Tobago and CIBC FirstCaribbean. Source: Central Bank of Trinidad and Tobago and CIBC FirstCaribbean.

Chart 5 Chart 6
US$/TTD Exchange Rate Capital Market Indicators

6.80 1,300 1.4%


Composite Stock Price Index (L)
TTD/USD Exchange Rate
1,200 91-day T-bill Rate (R) 1.2%

6.60 1.0%
1,100
0.8%
1,000
0.6%
6.40 900
0.4%
800 0.2%
6.20
700 0.0%
Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18
Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18

Source: Central Bank of Trinidad and Tobago and CIBC FirstCaribbean. Source: Central Bank of Trinidad and Tobago and CIBC FirstCaribbean.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 60

Turks and Caicos Shane Lowe


CIBC FirstCaribbean
Production, Prices, and Employment
Data for 2017 suggest that while residential construction likely improved relative to one year earlier, business activity
indicators imply mixed performances in private sector activity.
 Commercial bank lending for home construction and renovation increased 10.6% y/y during 2017. Further, lending
for residential construction increased 5.8% q/q during Q4 2017, immediately after the passage of Hurricane Irma
in September 2017.
 The Companies Registry Department’s latest statistics suggest that the number of business names registered,
number of trademarks registered and number of patents registered all increased 16.4% y/y, 62.2% y/y and 57.1%
y/y, respectively, but the number of ordinary companies incorporated and the number of exempt companies
incorporated declined 1.6% y/y and 10.3% y/y.

Developments in Financial Markets


th
While commercial bank loans declined for a 7 consecutive year in 2017, loan quality continued to improve during the
year.
 Total loans fell 0.7% y/y. Lending to businesses rebounded 1.9% y/y, but mortgages, loans to consumers and
loans to the government declined 0.7% y/y, 2.5% y/y, and 25.0% y/y, respectively.
 Higher retail (up 33.2% y/y), corporate (up 18.4% y/y) and non-resident (up 17.0% y/y) deposits increased total
deposits by 21.2% y/y.
 The loan-to-deposit ratio thus fell 15.1 percentage points y/y to 68.0%. Further, the non-performing loans ratio
declined from 11.3% to 7.7% between December 2016 and December 2017, while the regulatory capital to
risk-weighted assets ratio increased from 25.5% to 26.8% over the same period.

Chart 1 Chart 2
Key Economic Indicators (GDP Growth; %) Inflation (y/y; %)
10 9
Real GDP Growth All Items
5 8
7
0
6
-5 5
-10 4
3
-15
2
-20 1
-25 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2006 2007 2008 2009 2010 2011 2012 2013

Source: Turks and Caicos Statistical Office, S&P and CIBC FirstCaribbean. Source: Turks and Caicos Statistical Office, S&P and CIBC FirstCaribbean.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 61

Government Debt
During the fiscal year ending March 2017, the government produced a fiscal surplus of US$58.9 mln compared to a
budget surplus of US$37.4 mln and the prior year’s outturn of US$67.3 mln.
 The government collected more revenue year-over-year and relative to budget. Total revenue expanded US$3.3
mln y/y and US$11.5 mln relative to budget to US$267.2 mln. Non-recurrent receipts fell 26.2% y/y to US$4.1 mln,
but recurrent revenues rose 1.8% y/y to US$263.1 mln. Receipts of import duties, the hotel and restaurant tax,
customs processing fees, and stamp duties on land transactions advanced US$2.7 mln (4.0% y/y), US$3.4 mln
(5.8% y/y), US$1.2 mln (4.3% y/y), and US$0.8 mln (3.1% y/y), but income from work permits and residency fees,
and other revenues declined US$0.5 mln (2.6% y/y) and US$2.9 mln (4.8% y/y).
 The government spent US$208.3 mln – 4.6% less relative to their budget, but 5.9% more y/y. Recurrent
expenditure expanded 8.9% y/y to US$201.6 mln, but non-recurrent spending declined 41.8% y/y to US$6.7 mln.
Recurrent spending on personnel costs, transfers to the NHIB, subventions, asset rentals, and other recurrent
expenditures except hospital provisional charges increased US$6.8 mln (9.0% y/y), US$7.0 mln (36.1% y/y),
US$2.6 mln (27.3% y/y), US$0.03 mln (0.7% y/y), and US$3.5 mln (6.7% y/y), respectively, but hospital
provisional charges declined US$3.5 mln (14.8% y/y).
Total public debt declined 26.9% y/y to US$32.4 mln during March 2017.

Outlook
In 2018, the lingering effects of Hurricane Irma will likely boost economic growth, as reconstruction efforts boost building
activity. The likely surge in public capital expenditure and an already-upward trend in residential construction will likely aid
in rebuilding efforts, but the former will likely reduce the expected fiscal surplus if not financed by external grant funding.
However, debt will likely remain below the average of regional peers in the near- to medium-term.

Chart 3
Growth in Key Balances (%)
25 Growth in Loans
20 Growth in Deposits
15
10
5
0
-5
-10
-15
Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17

Source: Turks and Caicos Financial Services Commission and CIBC FirstCaribbean.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 62

About CIBC
CIBC (CM: TSX, NYSE) is a leading Canadian-based financial institution with a market capitalization of $50bln and a
Basel III Common Equity Tier 1 capital ratio of 10.6%. Through our four strategic business units – Canadian Personal and
Small Business Banking, Canadian Commercial Banking and Wealth Management, U.S. Commercial Banking and Wealth
Management, and Capital Markets – our nearly 45,000 employees provide a full range of financial products and services
to 11mln individual, small business commercial, corporate, and institutional clients in Canada, the U.S. and around the
world.
CIBC is committed to causes that matter to our clients, employees and communities. Our goal is to make a difference
through corporate donations, sponsorships and the volunteer spirit of employees. In 2017, CIBC invested more than $70
mln in community organizations across Canada and the U.S. through more than 2,200 charitable donations, including over
$45mln in corporate contributions and over $25mln in employee-led fundraising and giving.

Canadian Personal and Small Business Banking


Canadian Personal and Small Business Banking provides personal and small business clients across Canada with
financial advice, products and services through a team of advisors in our banking centres, as well as through our direct,
mobile and remote channels.
In 2017, we focused on building a strong, innovative, relationship-oriented bank. To accelerate our transformation and
deliver on our objective to be the best retail and small business bank in Canada, we maintained two strategic priorities:
 Enhancing the client experience by making it easier for our clients to bank when, where and how they want.
 Profitable revenue growth achieved by helping our clients through deeper relationships and advice.

Canadian Commercial Banking and Wealth Management


Canadian Commercial Banking and Wealth Management provides high-touch, relationship-oriented commercial and
private banking, as well as wealth management services to meet the needs of middle-market companies, entrepreneurs,
high-net-worth individuals and families, along with institutional clients across Canada.
Our goal is to be the leading relationship bank in Canada for our commercial and wealth clients by delivering best-in-class
advisory capabilities, value and long-term growth.

U.S. Commercial Banking and Wealth Management


U.S. Commercial Banking and Wealth Management provides high-touch, relationship-oriented commercial, personal and
small 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 markets we serve in the U.S.
Our goal is to build the go-to 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.

Capital Markets
Capital Markets provides integrated global markets products and services, investment banking advisory and execution,
corporate banking 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
core clients globally by delivering best-in-class insight, advice and execution. To enable CIBC’s strategy and priorities, we
collaborated with our partners across our bank to deepen and enhance client relationships.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018 63

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 17 markets, including Anguilla, 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.

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
Caribbean Market Overview – Q1 2018

Notes

CIBC Capital Markets & CIBC FirstCaribbean International Bank March 2018
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Luis Hurtado Paul Douglas Dean Chang Shane Lowe
Director Executive Director Executive Director & Head Strategy &
Macro Strategy Global Markets Client Solutions Group Economic Analyst
Fixed Income Currencies & Distribution Caribbean and Latin America CIBC FirstCaribbean CIBC FirstCaribbean
CIBC Capital Markets CIBC Capital Markets International Bank International Bank
Brookfield Place Brookfield Place Head Office Head Office
161 Bay Street, 5th Floor 161 Bay Street, 5th Floor Warrens, St. Michael Warrens, St. Michael
Toronto, ON M5J 2S8 Toronto, ON M5J 2S8 BB22026 Barbados BB22026 Barbados
Tel. +1 416 594-8284 Tel. +1 416 594-8506 Tel: +1 246 367-2845 Tel: +1 246 367-2227
luis.hurtado@cibc.com paul.douglas@cibc.com dean.chang@cibcfcib.com shane.lowe@cibcfcib.com