ST VINCENT AND THE GRENADINES (CU)_Although St. Vincent and the Grenadines’ economic growth outlook is “positive,” the International Monetary Fund (IMF) notes that the island is also vulnerable to serious downside risks, primarily from the constant threat of natural disasters and intensified spillovers from Russia’s conflict in Ukraine, which leads to higher commodity prices. For 2022, it projects economic growth of 5%, which will rise to 6% the following year.
An IMF delegation’s two-week assignment to prepare for the 2022 Article IV consultation sessions on macroeconomic policies and economic developments has come to a close. The mission, headed by economist Nan Geng, observed that the island is recovering from a number of shocks, and that the authorities’ prompt policy decisions, supported by two IMF Rapid Credit Facility (RCF) disbursements and funding from other international financial institutions, have helped safeguard lives and livelihoods and contain economic scars.
“The outlook is positive but subject to significant downside risks, primarily from the ever-present threat of natural disasters and intensified spillovers from Russia’s war in Ukraine resulting in higher commodity prices.
“Policies need to be calibrated to support a resilient and inclusive recovery, while safeguarding debt sustainability and financial sector stability. Near-term priorities are health and reconstruction spending and time-bound targeted fiscal support while maintaining fiscal prudence,” Geng said.
She stated that in order to absorb shocks and strengthen fiscal sustainability after the recovery takes hold, fiscal buffers should be rebuilt, especially by fully implementing the fiscal responsibility framework (FRF). According to the head of the IMF mission, maintaining supply-side reforms to boost productivity and competitiveness as well as enhancing resilience to natural catastrophes and climate change are still essential for sustainable growth, which is essential to the sustainability of public debt.
She claimed that the impact of the war in Ukraine, combined with the pandemic and volcano eruptions in 2021, underlined St. Vincent’s susceptibility to outside shocks and natural disasters.
“The shocks wielded a major blow to agriculture and tourism, two main sectors. The proactive policy responses mitigated the socio-economic impact of the shocks and helped contain economic scars.’
The gross domestic product (GDP) is estimated to have increased by 0.5 percent in 2021, after shrinking by 5.3 percent in 2020.
“Despite authorities’ strong efforts to mobilize revenue and contain non-priority spending, critical fiscal responses to address the humanitarian and healthcare crises, coupled with weaker economic activity, raised public debt to about 88 percent of GDP in 2021.”
She claimed that despite first quarter stayover arrivals reaching 45% of pre-pandemic levels, the tourism industry had been slow to recover. The 2020–21 shocks have been made worse by the war in Ukraine, which has caused import costs to skyrocket.
The IMF predicted that this year’s real GDP growth would be 5% due to post-eruption rebuilding activities, ongoing tourism and agricultural recovery, and the beginning of several significant investment projects.
“Growth is projected to strengthen to six percent in 2023 as major projects get into full swing. Higher import prices, in particular those for fuel and food, are projected to push inflation to 5.7 percent in 2002.
