IMF Executive Board Concludes 2022 Article IV Consultation with Antigua and Barbuda
IMF News, May 31, 2023
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- Published: May 31, 2023
Economic recovery and recent performance
- Real output contracted by 20 percent in 2020 due to the COVID-19 pandemic.
- Growth is estimated at 5¼ percent in 2021, driven by a rebound in tourism and construction activity.
- Inflation was subdued in 2021 due to price controls on utilities, fuels, and public transportation despite a surge in international energy prices.
- Fiscal position improved in 2021 with a narrowing of the primary deficit as pandemic-related spending was wound down and better tax administration and higher external grants bolstered revenues.
- Public debt peaked at 102 percent of GDP and is projected to decline to 91 percent of GDP in 2022.
- The financial system remains stable, but bank credit to the private sector is weak.
Outlook and projections
- Real GDP is projected to expand by 6 and 5½ percent in 2022 and 2023 respectively, supported by strong tourist arrivals, foreign direct investment in the hospitality sector, and public sector projects.
- Output is expected to return to pre-pandemic levels only by 2025 due to scarring effects of the pandemic.
- Inflation is forecasted to accelerate to 8½ percent in 2022, reflecting pass-through from higher global food and fuel prices, before moderating to 4½ percent in 2023.
- Risks to the outlook are tilted to the downside, including further commodity price shocks, a global growth slowdown, a resurgence of COVID, tighter global financial conditions, lower citizenship-by-investment program (CIP) revenues, and natural disasters.
Fiscal position, financing, and arrears
- Continued fiscal consolidation and growth recovery have helped improve the fiscal position, but outturns underperformed the targets envisaged in the government’s medium-term fiscal strategy.
- Gross financing needs and arrears to domestic and external creditors remain high.
- Securing long-term financing and preventing accumulation of new arrears are critical amid tight global financial conditions.
- Authorities should maintain efforts to extend the maturity profile of debt in domestic and external markets to reduce rollover risks and engage closely with creditors to clear remaining arrears.
Policy recommendations and structural reforms
- Near-term fiscal policy: continue to protect the vulnerable against rising living costs through targeted support.
- Implement a clear framework for coordination among government entities responsible for social safety net programs.
- Allocate sufficient resources to complete and maintain a centralized beneficiary registry.
- Pricing and subsidies:
- Put in place an automatic fuel pricing mechanism with full pass-through of international prices, combined with targeted social protection programs, to move away from generalized, untargeted subsidies.
- Revenue and fiscal consolidation:
- Additional revenue mobilization is needed to achieve MTFS targets: limit tax exemptions, introduce new tax measures, and contain the wage bill.
- Conduct a public sector employment census and develop a skills database as part of a longer-term strategy to address the wage bill.
- Institutional and public financial management reforms:
- Consider legislating the MTFS and Fiscal Resilience Guidelines to build political consensus.
- Operationalize the Climate Resilience and Development Fund, Fiscal Resilience Oversight Committee, and single window system at customs.
- Implement e-filing and e-payment of taxes and the amended Finance Administration Act and Procurement Administration Act.
- Introduce a performance report card system for SOEs.
- Develop a public financial management action plan based on the recent Public Expenditure and Financial Accountability self-assessment.
- Pension and investment strategy:
- Gradually increase the contribution rate and implement automatic adjustments to the retirement age in line with increasing life expectancy at retirement.
- Revamp the investment strategy to address liquidity constraints and increase longer-term returns.
- Financial sector and AML/CFT:
- Monitor asset quality and provisioning buffers closely.
- Formulate a national crisis management plan in collaboration with the ECCB.
- Continue strengthening AML/CFT and CIP frameworks to protect correspondent banking relationships and integrity of the CIP.
- Credit access and labor market:
- Increase the role of the regional credit bureau and partial credit guarantee scheme to enhance credit quality and alleviate collateral constraints.
- Modernize the insolvency law to incentivize lending.
- Emphasize training, vocational education, skills certification, and job search assistance to reintegrate workers into the labor force.
- Climate and energy:
- Leverage donor resources and international financing for climate resilience projects given large investment needs and limited fiscal space.
- Accelerate transition to renewables, supported by private sector financing, to reduce energy costs and improve competitiveness.
Executive Board assessment highlights
- Antigua and Barbuda’s economy is recovering but facing headwinds from multiple external shocks.
- Higher food and fuel prices are raising inflation, eroding real incomes, and exacerbating fiscal and external imbalances.
- The external position in 2021 was weaker than the level implied by medium-term fundamentals and desirable policies.
- Continued reforms across fiscal policy, public financial management, pensions, financial stability, AML/CFT, CIP, credit access, labor market, and climate resilience are essential to restore resilience and support sustainable growth.
Selected economic and social indicators (as reported)
- Population (2021): 98,219
- Adult literacy rate (2015): 99
- GDP per capita (US$, 2021): 14,978
- Mean years of schooling (2021): 9.3
- Life expectancy at birth (years, 2021): 78.5
- Human Development Index rank (2021, of 191 economies): 71
- Mortality rate (under 5, per 1,000 live births, 2020): 6
Key macroeconomic projections and recent series (annual percentage change unless indicated)
- Real GDP: 2020 -20.2; 2021 5.3; 2022 6.0; 2023 5.6; 2024 5.4; 2025 4.0; 2026 2.7
- Nominal GDP: 2020 -18.8; 2021 7.4; 2022 15.0; 2023 10.3; 2024 7.9; 2025 6.1; 2026 4.8
- Consumer prices (end of period): 2020 2.8; 2021 1.2; 2022 10.5; 2023 2.0
- Consumer prices (period average): 2020 1.6; 2021 8.5; 2022 4.5
- Broad money (M2) growth: 2020 -5.2; 2021 13.9; 2022 3.9
- Credit to private sector (annual change): 2019 1.3; 2020 -4.1; 2021 0.0; 2022 5.0
- Central government primary balance (percent of GDP): 2019 -3.8; 2020 -0.4; 2021 1.5; 2022 2.1
- Central government overall balance (percent of GDP): 2019 -4.0; 2020 -6.4; 2021 -4.8; 2022 -2.7; 2023 -3.4; 2024 -0.5
- Total revenue and grants (percent of GDP): 2021 20.6; 2022 20.9; 2023 20.2; 2024 21.2
- Total expenditure (percent of GDP): 2021 25.3; 2022 23.7; 2023 23.5; 2024 22.4; 2025 21.4
- Current account balance (percent of GDP): 2019 -7.5; 2020 -18.4; 2021 -15.0; 2022 -20.3; 2023 -14.1; 2024 -13.4
- Trade balance (percent of GDP): 2019 -34.2; 2020 -29.3; 2021 -33.7; 2022 -39.8; 2023 -37.5
- Nonfactor service balance (percent of GDP): 2019 35.1; 2020 25.6; 2021 26.0; 2022 29.1; 2023 33.6
- Gross tourism receipts (percent of GDP): 2019 53.5; 2020 30.1; 2021 37.1; 2022 45.4; 2023 46.0
- External public sector debt (percent of GDP): 2019 36.5; 2020 48.1; 2021 50.5; 2022 50.0; 2023 50.1
- Net imputed international reserves (US$ million): 2017 314; 2018 329; 2019 279; 2020 222; 2021 324; 2022 354; 2023 419; 2024 486; 2025 528; 2026 548; 2027 553
- Months of prospective imports (net imputed international reserves): 2017 3.3; 2018 4.4; 2019 4.6; 2020 3.3; 2021 4.4
- GDP at market prices (EC$ million): 2019 4,556; 2020 3,700; 2021 3,972; 2022 4,567; 2023 5,040; 2024 5,439; 2025 5,770; 2026 6,045; 2027 6,332
- Public debt stock (EC$ million): 2019 3,702; 2020 3,754; 2021 4,066; 2022 4,179; 2023 4,317; 2024 4,367; 2025 4,384; 2026 4,370; 2027 4,355
- Public debt (percent of GDP): 2019 81.3; 2020 101.5; 2021 102.4; 2022 91.5; 2023 85.7; 2024 80.3; 2025 76.0; 2026 72.3; 2027 68.8
IMF Communications Department, Press Release No. 23/187 — IMF Executive Board concluded the 2022 Article IV consultation with Antigua and Barbuda on a lapse-of-time basis.