IMF Executive Board Concludes 2018 Article IV Consultation with St. Vincent and the Grenadines

February 25, 2019

On February 15, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with St. Vincent and the Grenadines. The 2018 Article IV consultation focused on policies to achieve stronger and sustainable growth, build fiscal buffers, bolster resilience to natural disasters, and ensure financial stability

The economy of St. Vincent and the Grenadines has been recovering. The closure of Buccament Bay Resort (the largest hotel on the main island) and heavy rains with flooding and landslides slowed down growth in the second half of 2016 and early 2017. Following the opening of the new airport, however, tourist arrivals have recovered, boosting tourism-related services (such as hotels, restaurants, and retail). Increased demand for reconstruction materials from Dominica (struck by Hurricane Maria in September 2017) also helped the recovery. As a result, quarterly data show that output growth (year-on-year) has turned positive since the third quarter of 2017. Over the past year, inflation has remained around 2-3 percent.

The growth outlook is positive. Staff expects real GDP growth to rebound from 0.7 percent in 2017 to 2 percent in 2018, and further to 2.3 percent in 2019, driven by increases in tourist arrivals, tourism-related activities (including investment in hotels and resorts), and related local production. Beyond 2020, growth would be sustained at around 2.3 percent, assuming steady tourism and investment growth.

This outlook is subject to both external and domestic risks. External risks include weaker-than-expected global growth, tighter global financial conditions, and higher oil prices. Domestic risks include more severe and frequent natural disasters, the loss of correspondent banking relationships, and materialization of financial sector risks. There is also upside potential stemming from stronger-than-expected tourist arrivals, investor interest, concessional financing for capital projects, and the successful completion of the geothermal power plant.

Executive Board Assessment [2]

Executive Directors commended the authorities for successfully reinvigorating the St. Vincent and the Grenadines’ economy. Nonetheless, they noted the continuing challenges in terms of making economic growth more sustainable, reducing public debt, and increasing resilience to natural disasters.

Directors stressed the importance of advancing structural reforms to raise longer‑term growth. They urged the authorities to capitalize on the growth opportunities created by the new airport. They recommended vigorously implementing policies to foster private sector activity, by improving the investment climate and strengthening human and physical capital, including investing in climate‑resilient infrastructure.

Directors emphasized the importance of bolstering fiscal buffers. They welcomed the authorities’ commitment to meeting the 60 percent of GDP debt target by 2030 and underscored the need for fiscal consolidation that does not jeopardize economic growth. They recommended prioritizing capital projects taking into account capacity and budget constraints and seeking concessional financing. Directors also encouraged taking additional fiscal measures, including broadening the tax base and reforming the pension system.

Directors welcomed the establishment of the Contingency Fund as an important instrument to protect public finances from the impact of natural disasters and climate change. They underscored the need to legislate the Contingency Fund’s governance and operational framework to ensure its effectiveness and transparency. Directors also suggested expanding the coverage of disaster insurance, especially against floods. More generally, they recommended continuing to strengthen disaster preparedness, including reviewing the National Emergency and Disaster Act, updating river basin flood risk maps, and enhancing public education and awareness.

Directors encouraged the authorities to strengthen the institutional fiscal framework. Priorities include adopting a medium‑term fiscal framework, strengthening revenue administration by moving toward a risk‑based approach and completing the various reform initiatives, issuing regulations to strengthen the oversight of state‑owned enterprises, and establishing a legal and institutional framework to assess potential risks from public‑private partnerships.

Directors highlighted the need to further strengthen financial sector oversight. They urged the authorities to enact pending legislation to strengthen the Financial Services Authority’s enforcement power. Directors urged the authorities to move ahead with preparing a crisis management plan for the non‑bank financial sector and setting up a Financial Crisis Management Committee, building on earlier technical assistance provided by CARTAC.

Directors commended progress in addressing remaining legal deficiencies in the AML/CFT framework. Going forward, they recommended focusing on ensuring the effectiveness of AML/CFT preventative measures and completing the National Risk Assessment.

St. Vincent and the Grenadines: Social and Demographic Indicators 2014–2019

Area (sq. km)

389.3

Adult literacy rate (percent, 2001)

89.0

Population (2016)

Health and nutrition

Total (thousands)

109.6

Calorie intake (per capita a day, 2007)

2,810

Rate of growth (percent per year)

0.09

Population per physician (per thousand, 2004)

1.2

Density (per sq. km.)

281.5

Health expenditure per capita (PPP-2011, 2004)

917

Population characteristics

Gross domestic product (2016)

Life expectancy at birth (years, 2016)

73.0

(millions of US dollars)

771

Infant mortality (per thousand live births, 2016)

15.2

(millions of EC dollars)

2,081

Under 5 mortality rate (per thousand, 2016)

17.0

(US$ per capita)

7,000

2014

2015

2016

2017

2018

2019

Proj.

(Annual percentage change, unless otherwise specified)

Output and prices

Real GDP (factor cost)

0.2

0.8

0.8

0.7

2.0

2.3

Real GDP (market prices)

1.2

1.3

2.0

0.9

2.0

2.3

Nominal GDP (market prices)

0.9

3.8

2.0

1.9

5.2

4.6

Consumer prices, end of period

0.1

-2.1

1.0

3.0

2.0

2.0

Consumer prices, period average

0.2

-1.7

-0.2

2.2

2.4

2.0

Banking system 1/

Net foreign assets

1.1

1.7

8.8

-2.6

-0.9

3.4

Net domestic assets

8.4

12.0

-14.3

3.8

1.9

1.8

Credit to private sector

-0.2

1.7

1.0

1.1

-0.1

1.3

Central government finances (in percent of GDP)

Total revenue

29.3

27.9

29.8

30.3

27.8

28.2

Tax revenue

24.0

23.6

25.5

25.7

24.1

24.4

Grants

2.0

1.2

1.2

2.1

1.4

1.4

Total expenditure and net lending

32.3

30.0

28.7

30.8

29.8

29.9

Current expenditure

25.9

25.1

24.9

26.7

26.2

26.0

Wages and salaries

12.6

12.6

13.2

13.3

12.8

12.7

Interest

2.3

2.2

2.1

2.3

2.6

2.4

Capital expenditure

6.4

4.9

3.8

4.1

3.6

3.9

Overall balance

-3.0

-2.1

1.1

-0.5

-2.0

-1.7

Overall balance (excl. grants)

-5.0

-3.3

-0.1

-2.6

-3.4

-3.1

Primary balance

-0.7

0.1

3.2

1.9

0.6

0.8

Primary balance (excl. grants)

-2.7

-1.1

1.9

-0.2

-0.8

-0.6

External sector (in percent of GDP)

External current account

-25.8

-14.5

-15.2

-17.2

-15.9

-15.0

Exports of goods and services

35.2

37.4

37.9

36.0

37.2

37.9

Imports of goods and services

61.1

54.5

55.7

54.3

55.0

54.0

Public sector external debt (end of period)

45.5

46.4

56.7

47.4

44.8

45.0

External public debt service

(In percent of exports of goods and services)

12.6

10.3

27.7

51.0

28.4

15.2

Memorandum items

Gross public sector debt (in percent of GDP) 2/

79.4

79.4

82.8

74.2

73.1

71.4

Nominal GDP (market prices; in millions of EC$)

1,965

2,040

2,081

2,120

2,231

2,334

Sources: ECCB; Ministry of Finance and Planning; and IMF staff estimates and projections.

1/ Annual changes relative to the stock of broad money at the beginning of the period.

2/From 2016, reflects additional debt contracted with PetroCaribe but not previously recorded (EC$ 112 million or 5.4 percent of GDP in 2016). It includes debt of central government and state-owned enterprises.


[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.

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