SAINT LU­CIA AND THE IMF’S 3.4% GROWTH FORE­CAST

The Star (St. Lucia) - Business Week - - FRONT PAGE - BY ED KENNEDY, STAR BUSINESSWEEK COR­RE­SPON­DENT

When it comes to the In­ter­na­tional Mon­e­tary Fund’s (IMF) re­cent as­sess­ment of Saint Lu­cia, read­ers of The STAR Businessweek have much to be ex­cited about. The IMF’s re­cent Re­gional Eco­nomic Out­look gave ku­dos to the strong per­for­mance of the tourism sec­tor es­pe­cially, for hav­ing been a key driver of broader eco­nomic growth. The most re­cent re­port fol­lowed on from the in-depth ex­am­i­na­tion of Saint Lu­cia un­der the IMF’s Ar­ti­cle IV con­sul­ta­tions, see­ing it also sin­gle out (along­side tourism) for­eign di­rect in­vest­ment and the in­creased in­vest­ment in in­fra­struc­ture as core el­e­ments of the na­tion’s eco­nomic mo­men­tum.

Yet, while the short term pro­jec­tions were good, the IMF’s re­port has also de­tailed some is­sues ex­pected to im­pact in the long term. The ben­e­fit of aware­ness about them now, means there’s time to grow dia­logue and con­sider what op­tions ex­ist to ad­dress them go­ing for­ward. So let’s dive in­depth.

BACK­GROUND

Hav­ing con­cluded an Ar­ti­cle IV con­sul­ta­tion in June of this year, the IMF has pro­vided a pos­i­tive out­look for Saint Lu­cia.

While these fore­casts are con­tin­gent, in part, on the ex­pected com­ple­tion of a num­ber of the ma­jor tourism projects that have been in de­vel­op­ment — like the Fair­mount in Choiseul, The San­dals Golf & Coun­try Club, Dreams and Se­crets in Canelles and the the Pearl of the Caribbean’s first stage — a de­lay or set­back in one or all would im­pact the IMF’s view­point. Ul­ti­mately, the IMF’s as­sess­ment of Saint Lu­cia’s progress in the short term is bullish.

While the short term is promis­ing, the re­port also un­der­lined the need for more sub­stan­tial change to drive growth in the long term, with a fo­cus on re­mov­ing struc­tural bar­ri­ers and re­duc­ing high pro­duc­tion costs.

Yet com­bat­ting the im­pact of cli­mate change re­mains cen­tral to any fu­ture plan­ning. Al­ready the dam­age caused by it ac­counts for 1% of Saint Lu­cia’s an­nual GDP. In a more se­vere weather en­vi­ron­ment, it could ex­ceed 5%, and place new pres­sure on so­cial sup­ports and ser­vices, es­pe­cially as the pro­jec­tions for di­min­ished tax rev­enue in this sce­nario would make a bad prob­lem worse.

Along­side this, one over­ar­ch­ing goal of driv­ing down pub­lic debt re­mains key. The IMF con­tends that a greater fo­cus will need be placed be­hind this goal if Saint Lu­cia is to meet its Eastern Caribbean Cur­rency Union debt tar­get of ‘60 by 30’ (60% by 2030).

PRO­JEC­TIONS FROM OTHER GROUPS AGREE SAINT LU­CIA WILL GROW

As Ernst and Young noted in its re­port on the 2018 bud­get, though “di­ver­si­fi­ca­tion has proven to be a very dif­fi­cult path to ex­e­cute, it can­not be ig­nored”. The strengths that Saint Lu­cia has in tourism are real strengths, but the fu­ture will ide­ally see greater growth along­side the de­vel­op­ment of new sec­tors that co-ex­ist, and in­deed com­ple­ment it.

The fi­nan­cial re­forms that the Chas­tanet gov­ern­ment has made a pri­or­ity are cen­tral to this. Re­forms to more ef­fec­tively ad­dress a fore­clo­sure and post-fore­clo­sure auc­tions, re­forms to sim­plify the cur­rent laws sur­round­ing in­sol­vency, and the estab­lish­ment of lend­ing with the use of non-tra­di­tional as­sets have all been cited prior as cor­ner­stones of this new vi­sion.

For Saint Lu­cia to drive for­ward at its strong­est, it is not only these re­forms but the ca­pac­ity of the Chas­tanet gov­ern­ment (and any that may suc­ceed it) to cre­ate a re­formist spirit that will be key. There is no short­age of (demo­cratic) gov­ern­ments around the world that strug­gle to pass needed re­forms but, in Saint Lu­cia’s case, progress is cru­cial, and greater pres­sure is on Chas­tanet’s gov­ern­ment ac­cord­ingly.

THE FRAGILITY OF FORE­CASTS

While the fore­cast for Saint Lu­cia in the near term is pos­i­tive, it is not with­out qual­i­fi­ca­tions.

The fore­cast based upon the ex­pected com­ple­tion of ma­jor projects comes with the recog­ni­tion that a ma­jor project is al­ways sub­ject to the po­ten­tial for de­lays, and even out­right col­lapse.

An ex­am­ple of the ordeals that ma­jor de­vel­op­ment can of­fer up has been seen

in re­cent months within Saint Lu­cia, as Range De­vel­op­ment’s plans for a Ritz Carl­ton in Black Bay en­coun­tered im­mense tur­bu­lence. While the Black Bay episode was unique to Saint Lu­cia, other na­tions around the re­gion have known sim­i­lar ex­pe­ri­ences.

The Baha Mar re­sort in the Ba­hamas that en­coun­tered im­mense de­lays — tak­ing over ten years to de­velop be­fore its open­ing in April 2017, and even then do­ing so only in part — re­mains a rolled gold ex­am­ple of what can be en­coun­tered in a ma­jor tourism project.

Baha Mar was orig­i­nally fore­cast to add 12 per cent to the Ba­hamas GDP, yet ul­ti­mately the set­backs were so se­vere as to be a con­tribut­ing fac­tor to the S&P Global credit rat­ing agency down­grad­ing the Ba­hamas sov­er­eign rat­ing be­fore the re­sort’s open­ing. These events are a sober­ing warn­ing sign to any­one who reads fore­casts and pro­jec­tions as a clear-cut prom­ise.

CAN­NOT GO SHORT ON LONG TERM

The hur­dle ahead for Saint Lu­cia is to max­imise op­por­tu­ni­ties in the short term with­out di­min­ish­ing those in the long term. In many re­spects the tim­ing of this isn’t ideal as global trends, such as Brexit and con­cerns over the risk of an­other GFC, are see­ing na­tions pri­ori­tise short term gains, not to men­tion a 24/7 me­dia cy­cle that so of­ten sees politi­cians fo­cused on their po­lit­i­cal sur­vival at a par­tic­u­lar mo­ment in­stead of plan­ning for the years ahead.

But ul­ti­mately, and es­pe­cially for a na­tion like Saint Lu­cia with op­por­tu­nity now to con­sol­i­date gains that could see off fu­ture chal­lenges, there’s a ca­pac­ity here to chart a course for more long-term and sta­ble growth. Even if that growth turns out not to be as strong as the fore­cast in­di­cated, pri­ori­tis­ing con­sis­tency and sus­tain­abil­ity is surely the chief task for the econ­omy in the short and long term.

Hav­ing con­cluded an Ar­ti­cle IV con­sul­ta­tion in June of this year, the IMF has pro­vided a pos­i­tive out­look for Saint Lu­cia

The IMF ex­ec­u­tive board con­cludes 2018 con­sul­ta­tion with Saint Lu­cia

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