IMF Executive Board Concludes 2018 Article IV Consultation with St. Vincent and the Grenadines
IMF News, February 25, 2019
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Bibliographic details
- Published: February 25, 2019
Overview and context
- Date: February 25, 2019.
- 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 after setbacks from the closure of Buccament Bay Resort and heavy rains with flooding and landslides in late 2016 and early 2017.
- Tourism recovery was supported by the opening of the new airport and increased demand for reconstruction materials from Dominica (struck by Hurricane Maria in September 2017).
- Quarterly data show output growth (year-on-year) turned positive since the third quarter of 2017.
- Over the past year, inflation has remained around 2-3 percent.
Growth outlook and risks
- Staff projections:
- Real GDP growth (factor cost) expected to rebound from 0.7 percent in 2017 to 2 percent in 2018, and to 2.3 percent in 2019.
- Beyond 2020, growth would be sustained at around 2.3 percent, assuming steady tourism and investment growth.
- External risks:
- Weaker-than-expected global growth.
- Tighter global financial conditions.
- Higher oil prices.
- Domestic risks:
- More severe and frequent natural disasters.
- Loss of correspondent banking relationships.
- Materialization of financial sector risks.
- Upside potential:
- Stronger-than-expected tourist arrivals.
- Investor interest.
- Concessional financing for capital projects.
- Successful completion of the geothermal power plant.
Executive Board assessment — main messages
- Directors commended authorities for reinvigorating the economy but noted ongoing challenges in making growth more sustainable, reducing public debt, and increasing resilience to natural disasters.
- Structural reforms:
- Importance of advancing structural reforms to raise longer‑term growth.
- Urged authorities to capitalize on opportunities created by the new airport.
- Recommended vigorously implementing policies to foster private sector activity, improve the investment climate, and strengthen human and physical capital, including investing in climate‑resilient infrastructure.
- Fiscal buffers:
- Welcomed authorities’ commitment to meeting the 60 percent of GDP debt target by 2030.
- Underscored need for fiscal consolidation that does not jeopardize economic growth.
- Recommended prioritizing capital projects taking into account capacity and budget constraints and seeking concessional financing.
- Encouraged additional fiscal measures, including broadening the tax base and reforming the pension system.
- Disaster resilience:
- Welcomed establishment of the Contingency Fund to protect public finances from natural disasters and climate change.
- Underscored need to legislate the Contingency Fund’s governance and operational framework to ensure effectiveness and transparency.
- Suggested expanding coverage of disaster insurance, especially against floods.
- 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.
- Institutional fiscal framework:
- Encouraged adopting a medium‑term fiscal framework.
- Strengthen revenue administration by moving toward a risk‑based approach and completing reform initiatives.
- Issue regulations to strengthen oversight of state‑owned enterprises.
- Establish legal and institutional framework to assess potential risks from public‑private partnerships.
- Financial sector oversight:
- Urged enactment of pending legislation to strengthen the Financial Services Authority’s enforcement power.
- Urged preparation of a crisis management plan for the non‑bank financial sector and establishment of a Financial Crisis Management Committee, building on CARTAC technical assistance.
- AML/CFT:
- Commended progress in addressing legal deficiencies in the AML/CFT framework.
- Recommended focusing on ensuring the effectiveness of AML/CFT preventative measures and completing the National Risk Assessment.
Key statistics and projections
- Social and demographic indicators (2014–2019 highlights)
- Area (sq. km): 389.3
- Adult literacy rate (percent, 2001): 89.0
- Population (2016) Total (thousands): 109.6
- Rate of growth (percent per year): 0.09
- Density (per sq. km.): 281.5
- Life expectancy at birth (years, 2016): 73.0
- Calorie intake (per capita a day, 2007): 2,810
- Population per physician (per thousand, 2004): 1.2
- Health expenditure per capita (PPP-2011, 2004): 917
- Infant mortality (per thousand live births, 2016): 15.2
- Under 5 mortality rate (per thousand, 2016): 17.0
- Gross domestic product (2016) (millions of US dollars): 771
- Gross domestic product (2016) (millions of EC dollars): 2,081
- (US$ per capita): 7,000
- Macro indicators (annual percentage change or percent of GDP as provided)
- Real GDP (factor cost): 2014: 0.2; 2015: 0.8; 2016: 0.7; 2017: 2.0; 2018: 2.3; 2019: (Proj.)
- Real GDP (market prices): 2014: 1.3; 2015: 0.9
- Nominal GDP (market prices): 2016: 3.8; 2017: 1.9; 2018: 5.2; 2019: 4.6
- Consumer prices, end of period: 2014: 0.1; 2015: -2.1; 2016: 1.0; 2017: 3.0
- Consumer prices, period average: 2014: -1.7; 2015: -0.2; 2016: 2.2; 2017: 2.4
- Banking system (annual changes relative to the stock of broad money at the beginning of the period)
- Net foreign assets: 2014: 1.1; 2015: 1.7; 2016: 8.8; 2017: -2.6; 2018: -0.9; 2019: 3.4
- Net domestic assets: 2014: 8.4; 2015: 12.0; 2016: -14.3; 2017: 1.8
- Credit to private sector: 2014: -0.1
- Central government finances (in percent of GDP)
- Total revenue: 2014: 29.3; 2015: 27.9; 2016: 29.8; 2017: 30.3; 2018: 27.8; 2019: 28.2
- Tax revenue: 2014: 24.0; 2015: 23.6; 2016: 25.5; 2017: 25.7; 2018: 24.1; 2019: 24.4
- Grants: 2014: 2.1; 2015: 1.4
- Total expenditure and net lending: 2014: 32.3; 2015: 30.0; 2016: 28.7; 2017: 30.8; 2018: 29.9
- Current expenditure: 2014: 25.9; 2015: 25.1; 2016: 24.9; 2017: 26.7; 2018: 26.2; 2019: 26.0
- Wages and salaries: 2014: 12.6; 2015: 13.2; 2016: 13.3; 2017: 12.8; 2018: 12.7
- Interest: 2014: 2.6
- Capital expenditure: 2014: 6.4; 2015: 4.9; 2016: 4.1; 2017: 3.6; 2018: 3.9
- Overall balance: 2014: -3.0; 2015: -0.5; 2016: -2.0
- Overall balance (excl. grants): 2014: -5.0; 2015: -3.3; 2016: -3.4; 2017: -3.1
- Primary balance: 2014: -0.7; 2015: 3.2; 2016: 0.6
- Primary balance (excl. grants): 2014: -2.7; 2015: -1.1; 2016: -0.8; 2017: -0.6
- External sector (in percent of GDP)
- External current account: 2014: -25.8; 2015: -14.5; 2016: -15.2; 2017: -17.2; 2018: -15.9; 2019: -15.0
- Exports of goods and services: 2014: 35.2; 2015: 37.4; 2016: 37.9; 2017: 36.0; 2018: 37.2
- Imports of goods and services: 2014: 61.1; 2015: 54.5; 2016: 55.7; 2017: 54.3; 2018: 55.0; 2019: 54.0
- Public sector external debt (end of period): 2014: 45.5; 2015: 46.4; 2016: 56.7; 2017: 47.4; 2018: 44.8; 2019: 45.0
- External public debt service (In percent of exports of goods and services): 2014: 10.3; 2015: 27.7; 2016: 51.0; 2017: 28.4
- Memorandum items:
- Gross public sector debt (in percent of GDP) 2/: 2014: 79.4; 2015: 82.8; 2016: 74.2; 2017: 73.1; 2018: 71.4
- Nominal GDP (market prices; in millions of EC$): 2014: 1,965; 2015: 2,040; 2016: 2,120; 2017: 2,231; 2018: 2,334
Policy recommendations and priorities (summary)
- Advance structural reforms to raise long‑term growth and capitalize on the new airport.
- Foster private sector activity by improving the investment climate and strengthening human and physical capital, including climate‑resilient infrastructure.
- Bolster fiscal buffers while pursuing fiscal consolidation that preserves growth; prioritize capital projects and seek concessional financing.
- Broaden the tax base and reform the pension system.
- Legislate and operationalize the Contingency Fund with strong governance and transparency; expand disaster insurance coverage.
- Strengthen disaster preparedness: review National Emergency and Disaster Act, update river basin flood risk maps, and enhance public education and awareness.
- Adopt a medium‑term fiscal framework and move revenue administration toward a risk‑based approach.
- Strengthen oversight of state‑owned enterprises and create frameworks to assess PPP risks.
- Enact legislation to strengthen Financial Services Authority enforcement power; prepare a crisis management plan for the non‑bank financial sector and set up a Financial Crisis Management Committee.
- Focus on effectiveness of AML/CFT preventative measures and complete the National Risk Assessment.
IMF Executive Board Concludes 2018 Article IV Consultation with St. Vincent and the Grenadines, February 25, 2019.
