2023: A year of economic recovery, improved foreign reserves amid signs of economic growth

The year that ends today has been one of economic recovery and improved external finances, amidst signs of modest economic growth.

Improvement

At year’s end, the situation is certainly better than it was at the beginning. Last year was one of short-ages of essentials. People faced severe hardships in their daily lives.

The unavailability of basic necessities, their exorbitant prices, the loss of jobs among informal workers in particular, and difficulties in obtaining fuel characterised the country's economy.

There can be no doubt that the year ends with normalcy regained and prospects of growth.

External finances

The country’s external finances improved in 2023. There was a balance of payments surplus, despite an increased trade deficit, while external reserves are expected to be over US$ 5 billion at the end of 2023.

Protests

Nevertheless, it was also a year of protests and strikes by workers over the high living costs, inadequate wages, and the prospects of high taxation.

Poverty

Unemployment, poverty and malnutrition were high. It was a year that saw an exodus of the educated and skilled. This affected the education and social services of the country. All things considered, the year that ends today is one of economic revival, with signs of economic growth in 2024.

Growth

While 2022 was a year when the economy contracted by 4 percent, 2023 is expected to have grown in the second half of the year. Nevertheless, it was a year of high unemployment and an increase in pov-erty to nearly 40 percent of the population. Poverty and malnutrition have increased, and employment is shrinking. However, external finances have improved owing to increased remittances and earnings from tourism.

The trade deficit has widened due to lower export income and higher expenditure on imports.

External finances

At the beginning of the year, there was an improvement in the country’s external finances owing to increased remittances from abroad and higher earnings from tourism, though the trade deficit continued to widen. The decline in exports was mainly due to depressed demand for the country’s manufac-tured exports.

With a partial liberalisation of imports and higher import prices, the trade deficit widened. However, there was an increasing trend in inward remittances owing to higher inflows through official banking channels. There was also an increasing trend in tourism earnings.

By the end of November, tourism earnings had increased to US$ 3.5 billion and are expected to reach US$ 3.7 billion for the year. External reserves are expected to be about US$ 4.5 to US$ 5 billion at the end of the year.

Economic growth

The economy contracted in the first half of the year, but was on a growth trajectory in the second half.

In the first quarter, the economy contracted by as much as 4 percent. The contraction was reduced to 2 percent in the second quarter and grew by 1.4 percent in the third quarter.

This growth momentum has continued into the last quarter and is expected to be about 2 percent. Nevertheless, the economy’s growth is modest and only a sign of recovery from a severe contraction.

Failure

The significant economic failure this year has been the inability to get the economy moving on a path of rapid economic growth. Most economic activities were either stagnant or failed to grow.

Manufacturing

The country’s manufacturing industries suffered a severe setback owing to low export demand. Manufactured exports fell by about 50 percent to US$ 3 billion owing to depressed demand for exports in Western markets. Recessionary conditions in Western economies have affected our consumer exports.

Recession

These recessionary conditions are continuing and are likely to aggravate if the global recession expands. The cessation of the two wars is an underlying factor.

The construction sector has suffered a severe setback owing to the unavailability and high cost of raw materials. Only a limited liberalisation of raw materials for construction was possible in 2023.

Services

There was an improvement in services owing to the availability of essential inputs, particularly fuel. Yet, some small industries lacked raw materials for their revival. Fortunately, the tourist boom had backward linkages to several services.

Summary

In retrospect, the year that ends today has been one of economic recovery. Inflation has been brought down to a low level, though prices are high. External finances have improved, with foreign reserves of about US$ 5 billion likely at the end of the year amidst signs of modest economic growth.

Conclusion

The year-end is much better than its beginning, and certainly, 2023 is better than last year, when shortages of essentials caused severe hardships owing to the unavailability of essential items, their exorbitant prices, the loss of jobs among informal workers, and difficulties in obtaining fuel, which characterised the island’s economy.

There can be no doubt that the year ends with normalcy regained. Nevertheless, it is a year of high unemployment and an increase in poverty to nearly 40 percent of the population. It was a year when external finances improved, there was a balance of payments surplus, and external reserves increased. It was also a year of protests and strikes by workers about the high living costs, inadequate wages, and prospects of high taxation.

Final thought

The year that ends today is one of economic revival, with signs of economic growth. While 2022 was a year when the economy contracted by 4 percent, 2023 is expected to have grown in the second half of the year.