Above: St Lucia
By the Caribbean Journal staff
Following a period of “anemic” activity since the beginning of the downturn, economic activity in St Lucia is poised to “regain some momentum in 2013,” according to the International Monetary Fund, which recently concluded its Article IV Consultation with the country.
The country’s real GDP is projected to grow by 1.1 percent in 2013, following a 0.4 percent contraction in 2012.
“St Lucia has weathered the difficult post-crisis environment, becoming the largest economy in the Eastern Caribbean Currency Union (ECCU),” the fund said in a statement. “Activity is expected to regain some momentum in 2013, with an anticipated recovery in agriculture from a three‑year downturn, a pick-up in tourism, and a recent fiscal stimulus that may provide some support for economic activity.”
The IMF said St Lucia’s policy response to support “flagging growth” has been strong, with a “significant injection of public demand over the past three years.”
“But policy space has been virtually exhausted and fiscal vulnerabilities have built up,” it said.
The central government’s overall deficit has widened to 12 percent of GDP by the fiscal year 2012, with public debt increasing to about 78 percent of GDP.
“The financial system has weathered the downturn, but weak economic activity is taking a toll,” the IMF said. “The pre-crisis credit boom, which was among the largest in the ECCU, left financial institutions with notable asset quality problems: nonperforming loans almost doubled during the past two years, their resolution hampered in part by the inability of banks to foreclose on available collateral due to cumbersome procedures.”
With that said, St Lucia’s outlook remains challenging, with vulnerabilities having built up in the fiscal, financial and external sectors.
The fund’s Board of Directors said structural reforms to boost growth and address high unemployment are a key priority.
“Reforms should focus on strengthening the education system; improving the business climate, including through a more efficient public sector; increasing efficiency and reducing costs in product, labor and financial markets; and pursuing deeper regional integration,” it said.