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ST. VINCENT | IMF says St. Vincent economy recovering, growth outlook positive

The opening of the new Argyle Airport the opening of the new airport, has boosted tourist arrivals and tourism-related services (such as hotels, restaurants, and retail). The opening of the new Argyle Airport the opening of the new airport, has boosted tourist arrivals and tourism-related services (such as hotels, restaurants, and retail).
The Board of the International Monetary Fund has concluded its Article IV Consultations with the government of St. Vincent and the Grenadines, noting that the economy is recovering, despite the fact that it continues to face challenges in sustaining the growth momentum over the longer term.

In a statement, the IMF said "the closure of Buccament Bay Resort (the largest hotel on the main island) and heavy rains with flooding and landslides slowed down growth in the second half of 2016 and early 2017.

"Following the opening of the new airport, however, tourist arrivals have recovered, boosting tourism-related services (such as hotels, restaurants, and retail).

In addition "increased demand for reconstruction materials from Dominica (struck by Hurricane Maria in September 2017) also helped the recovery. As a result, quarterly data show that output growth (year-on-year) has turned positive since the third quarter of 2017. Over the past year, inflation has remained around 2-3 percent."

The IMF said " like other Caribbean economies its high exposure to natural disasters, a narrow production and exports base, and limited physical and human capital, constrain potential growth."

Despite this however, the IMF said "the growth outlook for St. Vincent is positive and  expects real GDP growth to rebound from 0.7 percent in 2017 to 2 percent in 2018, and further to 2.3 percent in 2019, driven by increases in tourist arrivals, tourism-related activities (including investment in hotels and resorts), and related local production. Beyond 2020, growth would be sustained at around 2.3 percent, assuming steady tourism and investment growth."

The IMF cautioned however, that "this outlook is subject to both external and domestic risks.External risks include weaker-than-expected global growth, tighter global financial conditions, and higher oil prices. Domestic risks include more severe and frequent natural disastersThere is also upside potential stemming from stronger-than-expected tourist arrivals, investor interest, concessional financing for capital projects, and the successful completion of the geothermal power plant."

The international lending agency had a number of recomendations for the country:

"The mission welcomes the government’s commitment to bringing the debt-to-GDP ratio down to 60 percent by 2030.To this end, under the mission’s baseline scenario, the primary surplus needs to be raised by ½ percentage points to around 1 percent of GDP. This could be done by containing wage bill growth at 3.5 percent a year and setting capital expenditure at 3.9 percent of GDP.

"The 2019 budget should demonstrate the government’s commitment to fiscal consolidation, by maintaining the primary surplus at around 0.7 percent of GDP, slightly above the 0.6 percent of GDP (the mission’s estimate) in 2018.

"The mission recommends incorporating expected fiscal costs of natural disasters, equivalent to 1.4 percent of GDP a year (the average of the past 15 years), in the budget framework. This could be partly covered by the contingency fund and insurance payouts (in total, 0.7 percent of GDP), with the balance covered through allocating expenditure reserves for emergency operations.

"Consideration should be given to expanding the coverage of disaster insurance, especially against floods to achieve additional buffers.

 

  • Countries: St_Vincent_Grenadines

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