IMF: Dominica Economic Recovery Continues, But Losing Momentum
Above: Roseau (CJ Photo)
By the Caribbean Journal staff
Dominica’s economic recovery is continues, but it is losing momentum, according to the International Monetary Fund, which last week concluded its 2012 Article IV Consultation with the country.
“Over the past two years, Dominica’s economy grew at a tepid rate of about 1 percent, supported by a notable fiscal stimulus, and output recovered to its pre-crisis peak,” the IMF said in a release. “The pace of activity has been decelerating so far this year with weakening external and domestic demand.”
The IMF’s staff forecasts growth of about 0.4 percent for Dominica’s GDP in 2012. That comes after estimated growth of 1 percent in 2011 and 1.2 percent in 2010.
In the near-term, downside risks have intensified with heightened global uncertainty and the planned stoppage of flights from the only non-regional air carrier servicing the island.
Geothermal energy development, or the opening of new tourist facilities, could strengthen the long-term outlook, however, the fund said.
On the monetary side, conditions have “not eased meaningfully,” as Dominica has not benefited from the significantly eased US monetary policy rates, as the Eastern Caribbean Currency Union has remained “fully committed” to maintaining the hard peg to the dollar.
Dominica’s central government deficit widened to about 4.5 percent of GDP in the fiscal year 2011-2012, and pushed debt to over 70 percent of GDP, almost 7 percentage points above pre-crisis levels.
The fund’s Executive Board said that supportive policies have helped Dominica’s economy weather the effects of the global financial crisis, but worsening external and internal environments have “weakened the forward momentum and amplified risks to macroeconomic stability.”
“Continued prudent macroeconomic policies, enhanced vigilance in the financial sector and accelerated structural reforms remain key to stronger growth prospects,” the board said.