Above: Bequia (Photo: Discover St Vincent)
By the Caribbean Journal staff
Economic indicators suggest that a “slow recovery may be underway” in St Vincent and the Grenadines, according to the International Monetary Fund, which recently concluded a visit to the country.
The IMF’s visit, which took place from Oct. 23 to Nov. 1, was for the annual Article IV discussions on economic developments and macroeconomics policies.
The fund’s mission was headed by Nita Thacker and met with Prime Minister Dr Ralph Gonsalves, Director General of the Ministry of Finance Maurice Edwards and other government and opposition officials, among others.
“Economic activity indicators suggest that a slow recovery may be underway, with some improvements in tourism and manufacturing,” Thacker said.
According to IMF data, real GDP increased by 0.4 percent last year, and is expected to grow below 1 percent in 2012. Growth in St Vincent is expected to reach its “potential level” of about 3 percent over the medium term.
The slow recovery is being buoyed by some improvements in tourism and manufacturing, the fund said.
“Risks to the growth outlook are on the downside, especially if the recovery in advanced economies stalls,” she said. “On a positive note, the decline in commodity prices, particularly fuel, has reduced pressure on inflation and on the balance of payments.”
The fund said the government’s fiscal position was expected to improve as well in 2012, although revenues were lower than projected due to the slow recovery and an “apparent decline in tax compliance.”
“Significant cuts to central government capital spending are projected to more than offset the lower revenues, leading to a reduction in the central government fiscal deficit,” Thacker said. “Looking forward, the authorities agreed with the mission on the need to reduce current spending, strengthen tax compliance and administration and improve the operational efficiency of the central government and state-owned enterprises.”
Resulting savings, the fund said, could be applied to growth and employment-generating capital projects and social safety nets for the poor.
“Structural reforms should continue to aim to create a growth-friendly environment and stimulate private sector activity to ensure medium-term growth and generate employment, especially for the youth,” Thacker said. “Achieving these goals will require vigorously implementing reforms, including easing access to credit and reducing its cost, enhancing labour skills, reducing energy costs and improving infrastructure.”
The mission will be preparing a report to be discussed by the IMF’s Executive Board early next year.