Above: St Kitts (CJ Photo)
St Kitts and Nevis is making “considerable progress” in its economic reform programme, according to the International Monetary Fund, which recently concluded a visit to the twin-island federation.
The IMF mission, which began Jan. 20 and concluded on Friday, involved discussions on the 2014 Article IV consultation and the seventh and eighth reviews under a three-year Stand-By Arrangement.
““There has been considerable progress under the authorities’ economic reform program. After a four-year contraction of economic activity there were firm signs of a recovery in 2013,” said Judith Gold, who led the mission.
In 2013, real GDP is estimated to have grown by 1.7 percent, the IMF said, with a pickup in tourism and construction, despite declines in manufacturing and communications.
The recovery in tourism and a “strong increase” in Citizenship by Investment application fees helped lower the country’s current account deficit from over 20 percent in 2011 to 11-12 percent in 2012 and 2013, the fund said.
“Growth in 2014 is expected to accelerate to 2.5-3 percent, with the continued recovery in tourism — supported by an increase in air lift capacity — and ongoing construction activity fueled by CBI related inflows and other Foreign Direct Investment (FDI) projects,” Gold said. “Over the medium-term, the economy is expected to continue to recover and reach its potential growth rate of about 3-3.5 percent.”
The mission said that continued fiscal discipline would be required over the medium term to achieve St Kitts and Nevis’ public debt target of 60 percent of GDP by 2020.
“While CBI receipts could support a more expansionary fiscal stance, relying on these windfall flows for recurrent spending could lead to an unsustainable fiscal position in the future. Instead, the inflows provide a unique opportunity to build fiscal buffers, including to provide for humanitarian assistance and reconstruction after natural disasters, increase public investment in infrastructure stabilize the economy during downturns, and repay expensive debt,” Gold said.
The IMF mission met with St Kitts and Nevis Prime Minister Dr Denzil Douglas, Nevis Premier Vance Amory and other officials.