IMF Executive Board Concludes 2023 Article IV Consultation with St. Kitts and Nevis
IMF News, March 31, 2023
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- Published: March 31, 2023
2022 economic rebound and near-term drivers
- GDP is estimated to have grown by 9 percent in 2022 after contracting 14.5 percent in 2020 and 0.9 percent in 2021.
- The lifting of all COVID-related travel restrictions in August 2022 sparked a strong rebound in the tourism sector and across the economy.
- The authorities’ proactive policy response, facilitated by fiscal buffers accumulated from a decade of prudent fiscal policy, helped shelter domestic prices from high global energy and food prices.
- These measures took a heavy toll on fiscal accounts in 2022; the primary balance ex-CBI revenue and land buybacks deteriorated to a deficit of 17 percent of GDP (vs. 15 percent in 2021).
- Large CBI inflows in 2022 helped finance the fiscal expansion, keeping public debt below the ECCU regional target of 60 percent of GDP.
Outlook, projections, and risks
- Return to the pre-pandemic activity level is expected by end-2024, with growth converging towards its medium-term path thereafter.
- The budget is expected to be broadly balanced through 2025 and then go into deficits—predicated on current policies.
- Risks to the outlook:
- Tilted to the downside in the short term (primary sources: global slowdown, particularly in the United States; global inflation; sustained commodity price volatility from lingering geopolitical uncertainty).
- Upside potential in the medium term from an acceleration of the transition to renewable energy and increased public-sector investment in resilience.
- The growing dependence on volatile and uncertain CBI revenue is identified as a major source of vulnerability.
Executive Board assessment and policy recommendations
- Directors encouraged the authorities to pursue prudent fiscal policies, ensure financial stability, and implement ambitious structural reforms to boost sustainable and inclusive growth.
- Fiscal policy:
- Fiscal stance should be tightened to entrench debt sustainability.
- Support for planned phasing-out of electricity price subsidies and other crisis-era support measures.
- Contain current expenditures, notably the wage bill, to create space for sustainable investment.
- Reduce dependence on CBI revenue through an overhaul of the taxation framework: reduce tax expenditures, streamline VAT, reform property taxes, and introduce a progressive personal income tax.
- Structural and resilience policies:
- Strengthen competitiveness, labor market development, and diversification.
- Increase resilient infrastructure spending and adopt an optimal insurance framework against natural disaster risks.
- Support transition toward renewable energy and establish a sovereign wealth fund to finance resilient investment and ensure adequate fiscal buffers.
- Improve delivery and access to education and vocational training, complemented by active labor market policies to reduce skills mismatches.
- Financial sector and governance:
- Re-assess the business model of the systemically important bank; further progress needed to de-risk its investment portfolio and reduce NPLs.
- Ring-fence public sector deposits from risks in any single bank.
- Closely monitor credit unions and continue advancing the AML/CFT agenda.
Key social, geographic, demographic indicators (selected)
- Area (sq. km): 269.4
- Population, Total (thousands, 2021 est.): 53.5
- Density (per sq. km., 2021): 198.8
- Rate of growth (percent per year, 2021): 0.66
- Life expectancy at birth (years, 2021): 71.7
- Adult literacy rate (percent, 2009): 97.8
- GDP (millions of U.S. dollars, 2021): 860.8
- GDP (millions of E.C. dollars, 2021): 2,324
- US$ per capita (2021): 16,076.7
- Headcount Poverty (percent, 2008): 23.7
- Income inequality (Gini coefficient, 2008): 0.38
Selected economic and fiscal indicators (2019–28) — notable figures and projections
- Real GDP (market prices):
- 2019: 4.0
- 2020: -14.5
- 2021: -0.9
- 2022: 9.0
- 2023 (Proj.): 4.5
- 2024 (Proj.): 3.8
- 2025 (Proj.): 3.0
- 2026 (Proj.): 2.7
- Real GDP (factor cost) 2022: 11.2
- Consumer prices, end-of-period:
- 2019: -0.8
- 2020: -1.2
- 2021: 1.9
- 2022: 2.6
- Broad money (annual percentage change):
- 2019: 5.6
- 2020: -8.1
- 2021: 8.9
- 2022: 6.9
- 2028 (Proj.): 8.2
- Nonperforming loans to total gross loans:
- 2019: 24.0
- 2020: 23.5
- 2021: 20.9
- 2022: 22.0
- Public sector (percent of GDP):
- Total revenue and grants:
- 2019: 37.4
- 2020: 35.0
- 2021: 50.4
- 2022: 51.5
- 2023 (Proj.): 43.6
- 2024 (Proj.): 41.5
- 2025 (Proj.): 39.1
- 2026 (Proj.): 37.0
- 2027 (Proj.): 35.4
- 2028 (Proj.): 33.8
- o/w Tax revenue:
- 2019: 18.5
- 2020: 18.8
- 2021: 19.0
- 2022: 18.7
- o/w CBI revenue:
- 2019: 14.8
- 2020: 11.3
- 2021: 23.3
- 2022: 25.8
- 2023 (Proj.): 17.0
- 2024 (Proj.): 13.0
- 2025 (Proj.): 11.5
- 2026 (Proj.): 10.0
- Total expenditure and net lending:
- 2019: 38.1
- 2020: 44.8
- 2021: 54.8
- 2022: 43.0
- Current expenditure 2022: 39.9
- Capital expenditure and net lending 2022: 14.9
- Primary balance:
- 2019: 0.5
- 2020: -1.7
- 2021: 6.8
- 2022: -2.1
- 2023 (Proj.): 2.1
- Overall balance:
- 2019: -3.1
- 2020: -3.3
- 2021: 0.6
- 2022: 0.3
- 2023 (Proj.): -0.5
- Overall balance (less CBI revenue):
- 2019: -19.2
- 2020: -21.8
- 2021: -22.3
- 2022: -18.1
- 2023 (Proj.): -18.0
- 2024 (Proj.): -17.9
- 2025 (Proj.): -18.7
- 2026 (Proj.): -19.7
- 2027 (Proj.): -21.1
- Total public debt (end-of-period):
- 2019: 54.3
- 2020: 68.0
- 2021: 68.9
- 2022: 58.4
- 2023 (Proj.): 55.3
- 2024 (Proj.): 53.3
- 2025 (Proj.): 51.7
- 2026 (Proj.): 50.9
- 2027 (Proj.): 51.4
- 2028 (Proj.): 53.4
- External sector (percent of GDP or exports where specified):
- External current account balance (percent of GDP):
- 2019: -5.8
- 2020: -10.9
- 2021: -5.0
- 2022: -3.6
- 2023 (Proj.): -2.8
- 2024 (Proj.): -1.9
- 2025 (Proj.): -1.3
- Trade balance (percent of GDP):
- 2019: -28.4
- 2020: -26.2
- 2021: -31.5
- 2022: -30.1
- Services, net (percent of GDP):
- 2019: 24.2
- 2020: 19.4
- 2021: 29.5
- 2022: 29.7
- Tourism receipts (percent of GDP):
- 2019: 32.6
- 2020: 12.1
- 2021: 17.8
- 2022: 21.5
- 2023 (Proj.): 24.6
- 2024 (Proj.): 26.6
- 2025 (Proj.): 27.4
- 2026 (Proj.): 26.8
- 2027 (Proj.): 26.3
- FDI (net) 2019: 3.3
- External public debt (end-of-period, percent of exports of goods and nonfactor services):
- 2019: 12.7
- 2020: 15.2
- 2021: 14.6
- 2022: 9.5
- Memorandum items:
- Net international reserves, end-of-period (in millions of U.S. dollars):
- 2019: 346.3
- 2020: 365.4
- 2021: 312.8
- 2022: 250.5
- 2023 (Proj.): 247.1
- 2024 (Proj.): 244.9
- 2025 (Proj.): 243.1
- 2026 (Proj.): 241.4
- 2027 (Proj.): 239.6
- 2028 (Proj.): 251.6
- Net international reserves (in percent of broad money):
- 2019: 32.2
- 2020: 35.6
- 2021: 21.0
- 2022: 19.6
- 2023 (Proj.): 18.4
- 2024 (Proj.): 17.4
- 2025 (Proj.): 16.4
- 2026 (Proj.): 15.4
- Holdings of SDRs, in millions of U.S. dollars:
- 2019: 16.8
- 2020: 28.8
- Nominal GDP at market prices (in millions of EC$):
- 2019: 2,991
- 2020: 2,388
- 2021: 2,628
- 2022: 2,837
- 2023 (Proj.): 2,973
- 2024 (Proj.): 3,115
- 2025 (Proj.): 3,265
- 2026 (Proj.): 3,421
- 2027 (Proj.): 3,586
IMF Communications Department; Press Release No. 23/99; March 31, 2023.