St. Vincent and Grenadines' recovery hampered by series of natural disasters: IMF

The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with St. Vincent and the Grenadines. St. Vincent and the Grenadines' recovery from the global financial crisis was hampered by a series of natural disasters, sluggish global demand and slow implementation of key infrastructure projects. Economic activity appears to have recovered in 2015-led by strong tourism inflows and a rebound in construction-while inflation has trended down due to falling food and fuel prices.

Lower oil prices have also narrowed the current account deficit. The commercial banking sector appears to remain solid, enabling a modest uptick in credit to the private sector that has been supportive of economic recovery.

The new airport, now foreseen for completion in 2016, is expected to sustain the nearand medium-term economic growth. Real GDP is projected to expand by 2.2 percent in 2016 and reach 3.1 percent over the medium-term as tourist arrivals are boosted by greater airlift capacity and construction expands tourism infrastructure.

The current account deficit is expected to narrow gradually, as tourism inflows increase. Additional imports to supply tourism services are expected to be financed by foreign direct investment.

Public debt, at 74pc of GDP at end-2015, has steadily increased since 2008, owing largely to the impact of the global financial crisis, construction of the new international airport and rehabilitation spending in response to three back to back natural disasters.

The authorities have committed to reducing public debt to the Eastern Caribbean Currency Union target of 60 percent of GDP by 2030.

They have made some progress towards consolidating the fiscal position since 2013, with a reduction of the primary deficit from 5 percent of GDP to an estimated 1.1pc of GDP in 2015.

Despite the new tax policy measures provided in the 2016 budget and the envisaged improvement in the primary balance, higher interest costs are expected to leave the fiscal position unchanged from 2015. Executive Directors welcomed the incipient economic recovery and improved external and fiscal positions in St. Vincent and the Grenadines.

They observed that the outlook is positive, particularly with prospects for the entry in operations of the new international airport and the development of geothermal energy, and risks are balanced.