IMF: Saint Lucia econ­omy im­prov­ing but debt still too high

The Star (St. Lucia) - - LOCAL -

The In­ter­na­tional Mon­e­tary Fund (IMF) says the Saint Lucia econ­omy is re­cov­er­ing and the short-term growth out­look is pos­i­tive. But it has warned that the Dr. Kenny An­thony ad­min­is­tra­tion still needs to re­duce the high pub­lic debt and im­prove com­pet­i­tive­ness to im­prove medium-term growth prospects and re­duce high un­em­ploy­ment.

“On the back of strong tourism in­flows and lower oil prices, the Saint Lu­cian econ­omy has re­turned to growth af­ter ex­pe­ri­enc­ing a re­ces­sion in 2012 and close-to-zero growth in 2013. GDP growth reached 0.5 per­cent in 2014 and is ex­pected to ac­cel­er­ate to 1.6 per cent in 2015, driven by tourism and trans­porta­tion ser­vices,” it said.

“The eco­nomic re­cov­ery has not yet spread to the en­tire econ­omy and, ac­cord­ing to the lat­est avail­able data, the un­em­ploy­ment rate re­mains high at 25 per cent, with youth un­em­ploy­ment above 40 per cent. Al­though un­em­ploy­ment has in­creased fol­low­ing the global fi­nan­cial cri­sis, most of it is struc­tural in na­ture and can­not be solely re­duced by de­mand-sup­port­ing poli­cies. Sup­ply bot­tle­necks, low pro­duc­tiv­ity, labour skill mis­matches, and high costs limit medium-term growth prospects well be­low what is nec­es­sary to re­duce un­em­ploy­ment on a durable ba­sis.”

The team from the Wash­ing­ton-based institution added that high pub­lic debt re­mains a sig­nif­i­cant vul­ner­a­bil­ity. It cur­rently stands at around 80 per cent of GDP – high by in­ter­na­tional stan­dards – and the IMF noted that ev­er­in­creas­ing in­ter­est pay­ments limit the bud­get re­sources avail­able for other uses, in­clud­ing high-im­pact so­cial and in­fra­struc­ture spend­ing.

“The au­thor­i­ties are com­mit­ted to the ECCU-wide debt tar­get of 60 per cent of GDP by 2030. Achiev­ing this tar­get re­quires a medi­umterm plan de­signed to strengthen con­fi­dence and to pro­vide buf­fers for risks, in­clud­ing from nat­u­ral dis­as­ters. In staff’s view, an ad­just­ment of four per cent of GDP over the next four years could ac­com­plish th­ese ob­jec­tives,” the IMF said.

The Fund also re­ferred to the Cit­i­zen­ship by In­vest­ment pro­gramme which the Saint Lucia gov­ern­ment expects to be a sig­nif­i­cant rev­enue stream. It has ad­vised gov­ern­ment that if it wants to make the most of the new op­por­tu­nity, it must take a pru­dent ap­proach.

“The an­nual cap on ap­proved cit­i­zen­ship ap­pli­ca­tions could be a strong de­vice for con­tain­ing th­ese risks.”

The IMF said the rev­enues from the pro­gramme should be used to lower pub­lic debt or to im­prove growth-en­hanc­ing in­fra­struc­ture.

In a press release is­sued this week the Saint Lucia Labour Party has con­grat­u­lated Prime Min­is­ter and Min­is­ter of Fi­nance Dr. Kenny D. An­thony and the Labour Gov­ern­ment on its con­trol of the eco­nomic levers of the coun­try over the last four years which has now re­sulted in the re­turn to pos­i­tive GDP growth as an­nounced in the lat­est re­port on Saint Lucia by the In­ter­na­tional Mon­e­tary Fund (IMF).

The Party notes with great pride that the coun­try has recorded growth in tourism, con­struc­tion, man­u­fac­tur­ing and agri­cul­ture. In­fla­tion has de­clined and fis­cal per­for­mance has im­proved.

The SLP ex­presses grat­i­tude to the vot­ers of Saint Lucia for the con­fi­dence with which they re­turned the man­age­ment of the coun­try to the Labour Party in 2011 and re­mains con­fi­dent that

Prime Min­is­ter Kenny An­thony has been urged to re­duce pub­lic debt.

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