IMF Executive Board Concludes 2024 Article IV Consultation with St. Vincent and the Grenadines
IMF News, July 22, 2024
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Bibliographic details
- Published: July 22, 2024
Timing and important note
- Executive Board concluded the Article IV consultation on July 22, 2024, endorsing the staff appraisal without a meeting on a lapse-of-time basis.
- The staff report reflects discussions during April–May 2024 and is based on information available as of June 14, 2024; it predates Hurricane Beryl (hit July 1) and therefore does not cover the hurricane’s impact or related policy response. Based on information available until July 11 and covered in the Staff Supplement, the thrust of the staff appraisal remains unchanged.
Recent economic performance
- Real GDP growth:
- 2022: 3.1 percent
- 2023: 5.8 percent (estimated)
- Recovery drivers:
- Large public and private investment
- Robust recovery of tourism
- Adverse factors:
- Drop in agriculture due to lingering effects from volcanic eruptions and historic high temperature in 2023
- Labor market:
- Formal employment surpassed pre-pandemic levels in 2022 and continued to grow in 2023 (estimated)
- Lasting negative impact on employment of young men
- Female labor force participation remains relatively low
- Inflation:
- Has subsided from its peak
- Public finances and debt:
- Non-interest current spending was significantly reduced, yet fiscal deficit widened in 2022–23 largely due to phasing of port-related spending and temporary factors
- Public debt declined from its peak in 2021 to about 87 percent of GDP in 2023 but remains well above pre-pandemic levels
- External sector:
- External position improved in 2022–23 supported by recovery in goods exports and tourism receipts
- Financial system:
- Remains sound
Outlook and key projections
- Growth and inflation:
- Growth projected at 4.9 percent in 2024
- Inflation projected to ease to 2.5 percent by end-2024
- Fiscal balances (2024 projections):
- Overall primary balances projected to improve significantly in 2024
- Overall primary balance (excluding pandemic-, volcano-, and port-related spending) projected at 2.1 percent of GDP in 2024
- Overall primary balance projected at -4.6 percent of GDP in 2024
- Policy stance:
- Authorities committed to reaching the regional debt ceiling and the medium-term fiscal strategy set out in the 2021 Rapid Credit Facility
- Risks:
- Downside: abrupt global slowdown, commodity price volatility, potential delays in investment projects
- Structural: rapidly ageing population, threat of natural disasters and climate change, still high public debt
- Upside: stronger-than-expected tourism development and agriculture sector recovery
Executive Board assessment — main findings
- Recovery: Robust recovery from recent compounded shocks attributed to decisive policy responses, large-scale investment projects, and strong tourism growth.
- Agriculture: Performance disappointed because of volcanic eruption impacts and historic-high 2023 temperatures.
- Labor: Employment returned to pre-pandemic levels except for young men; female labor force participation remains low.
- External position: In 2023, moderately weaker than level implied by medium-term fundamentals and desirable policies.
- Outlook: Favorable but subject to downside risks listed above.
Policy recommendations — fiscal and resilience
- Fiscal priorities:
- Focus on building buffers and supporting resilience and inclusive growth while safeguarding public debt sustainability.
- Continue commitment to regional debt target and 2021 RCF medium-term fiscal strategy.
- Adopt contingency planning and strengthen fiscal buffers given elevated global uncertainty and exposure to shocks.
- Disaster and risk financing:
- Adoption and implementation of the Disaster Risk Financing Strategy (DRFS) is important.
- Continue building the Contingencies Fund and establishing the Catastrophe Deferred Drawdown Option with the World Bank.
- Debt strategy:
- Pursue a lower debt target and stronger adjustment to provide a safety margin and increase probability of meeting regional debt target and public debt sustainability.
- Revenue and expenditure framework:
- Build a more efficient and equitable tax and expenditure framework to enhance revenue and support resilient, inclusive growth.
- Continue work to improve efficiency and inclusiveness of public spending and services.
- Improve efficiency and progressivity of the tax system while enhancing revenue.
- Pension and social protection:
- Further align the non-contributory Public Sector Pension System with the National Insurance Service (NIS) to improve fairness and reduce fiscal costs.
- Fiscal institutions and administration:
- Sustain efforts to enhance revenue administration, including enforcing VAT for private home vacation rentals, modernizing the Customs Act, and digitalizing the tax information management system.
- Strengthen the Fiscal Responsibility Framework (FRF) by recalibrating and fully operationalizing it, timely publishing and incorporating forward-looking budgetary advice into the Fiscal Responsibility Mechanism report, improving the budget process and medium-term fiscal planning, and strengthening SOE oversight and the cash management system.
Policy recommendations — structural reforms and social policy
- Infrastructure and investment climate:
- Continue investments in ports, roads, airports, and water supply; advance digitalization and investment climate reforms to alleviate supply-side bottlenecks and enhance competitiveness.
- Education and labor:
- Continue comprehensive education reform focusing on curriculum reforms and expansion of post-secondary and technical and vocational education and training to reduce skill mismatches and facilitate youth employment.
- Carefully design the unemployment insurance scheme, complemented by active labor market policies, to encourage labor market participation and formality and ensure sustainability.
- Gender and social inclusion:
- Complement strengthened parental leaves with targeted social investments to increase female labor force participation — e.g., enhance access to affordable and quality child and elderly care and reduce adolescent pregnancy.
- Climate and disaster resilience:
- Continue building structural and financial resilience and transitioning to renewable energy.
- Incorporate resilience features into new infrastructure, implement the recently adopted DRFS, enhance disaster management plan and legislation, and modernize the Electricity Act.
Policy recommendations — financial sector and AML/CFT
- Banking and supervision:
- Bolster provisioning levels for the banking system and accelerate disposal of long-dated nonperforming loans.
- Strengthen supervisory and regulatory frameworks and improve crisis preparedness.
- AML/CFT:
- Continue strengthening the AML/CFT framework to minimize the risk of losing Correspondent Banking Relationships.
Select economic indicators (from Table 1) — selected values and projections
- Real GDP (annual percent change):
- 2019: 0.7
- 2020: -4.3
- 2021: 2.1
- 2022: 3.1
- 2023: 5.8
- 2024: 4.9 (projected)
- 2025: 3.5 (projected)
- 2026: 2.7 (projected)
- Consumer prices, end of period:
- 2019: 0.5
- 2020: -1.0
- 2021: 3.4
- 2022: 6.7
- 2023: 4.0
- 2024: 2.5 (projected)
- 2025: 2.0 (projected)
- Broad Money (percent change):
- 2019: 10.3
- 2020: -6.6
- 2021: 12.8
- 2022: 0.2
- 2023: 9.3
- Credit to private sector, period average:
- 2019: -0.5
- 2020: -0.3
- 2021: 1.2
- 2022: 5.2
- Central government finances (in percent of GDP):
- Total revenue and grants:
- 2019: 25.8
- 2020: 28.9
- 2021: 30.9
- 2022: 26.8
- 2023: 26.4
- 2024: 27.5 (projected)
- 2025: 28.2 (projected)
- 2026: 28.4 (projected)
- Tax revenue:
- 2019: 22.0
- 2020: 23.6
- 2021: 26.2
- 2022: 23.3
- 2023: 21.7
- 2024: 23.1 (projected)
- 2025: 23.7 (projected)
- 2026: 23.8 (projected)
- 2027: 23.9 (projected)
- Total expenditure and net lending:
- 2019: 29.3
- 2020: 34.8
- 2021: 38.0
- 2022: 36.0
- 2023: 38.1
- 2024: 35.4 (projected)
- 2025: 31.7 (projected)
- 2026: 27.8 (projected)
- 2027: 27.7 (projected)
- 2028: 27.6 (projected)
- Current expenditure:
- 2019: 24.5
- 2020: 27.3
- 2021: 25.3
- 2022: 25.0
- 2023: 24.3
- 2024: 23.5 (projected)
- 2025: 23.4 (projected)
- Wages and Salaries (of current expenditure, percent of GDP):
- 2019: 12.4
- 2020: 13.9
- 2021: 14.1
- 2022: 12.5
- 2023: 12.0
- 2024: 11.6 (projected)
- 2025: 11.1 (projected)
- Interest (percent of GDP):
- 2019: 3.3
- 2020: 2.9
- 2021: 2.6
- Capital expenditure (percent of GDP):
- 2019: 4.8
- 2020: 7.5
- 2021: 9.1
- 2022: 10.7
- 2023: 10.4
- 2024: 7.4 (projected)
- 2025: 4.4 (projected)
- 2026: 4.2 (projected)
- Overall balance (percent of GDP):
- 2019: -3.4
- 2020: -5.9
- 2021: -7.2
- 2022: -9.2
- 2023: -11.7
- 2024: -7.9 (projected)
- 2025: -3.5 (projected)
- 2026: 0.6 (projected)
- 2027: 0.8 (projected)
- Overall balance (excl. grants):
- 2019: -8.1
- 2020: -8.8
- 2021: -10.8
- 2022: -14.0
- 2023: -10.0
- 2024: -5.7 (projected)
- 2025: -2.0 (projected)
- 2026: -1.6 (projected)
- 2027: -1.4 (projected)
- 2028: -1.3 (projected)
- Primary balance:
- 2019: -1.2
- 2020: -3.7
- 2021: -4.7
- 2022: -6.9
- 2023: -4.6
- 2024: 3.2 (projected)
- External current account (percent of GDP):
- 2019: -2.4
- 2020: -15.9
- 2021: -22.2
- 2022: -18.9
- 2023: -17.6
- 2024: -17.0 (projected)
- 2025: -14.1 (projected)
- 2026: -12.2 (projected)
- 2027: -10.3 (projected)
- 2028: -9.3 (projected)
- 2029: -8.9 (projected)
- Exports of goods and services (percent of GDP):
- 2019: 36.1
- 2020: 21.4
- 2021: 15.8
- 2022: 28.1
- 2023: 33.5
- 2024: 36.4 (projected)
- 2025: 37.3 (projected)
- 2026: 38.5 (projected)
- 2027: 38.9 (projected)
- 2028: 39.4 (projected)
- 2029: 39.6 (projected)
- Imports of goods and services (percent of GDP):
- 2019: 46.8
- 2020: 43.4
- 2021: 47.9
- 2022: 54.4
- 2023: 56.1
- 2024: 57.1 (projected)
- 2025: 54.7 (projected)
- 2026: 54.2 (projected)
- 2027: 52.7 (projected)
- 2028: 52.3 (projected)
- 2029: 52.1 (projected)
- Public sector external debt (end of period, percent of GDP):
- 2019: 48.0
- 2020: 55.1
- 2021: 65.7
- 2022: 62.1
- 2023: 62.2
- 2024: 66.0 (projected)
- 2025: 68.3 (projected)
- 2026: 67.1 (projected)
- 2027: 64.1 (projected)
- 2028: 61.1 (projected)
- 2029: 58.0 (projected)
- External public debt service (percent of exports of goods and services):
- 2019: 47.8
- 2020: 77.0
- 2021: 48.1
- 2022: 25.4
- 2023: 15.3
- 2024: 16.5 (projected)
- 2025: 15.5 (projected)
- 2026: 13.5 (projected)
- 2027: 13.0 (projected)
- Memorandum items:
- Holdings of SDRs (in millions of EC$):
- 2019: 4.1
- 2020: 44.5
- 2021: 40.6
- 2022: 39.0
- Gross public sector debt (in percent of GDP):
- 2019: 68.1
- 2020: 79.0
- 2021: 88.3
- 2022: 84.7
- 2023: 87.1
- 2024: 88.2 (projected)
- 2025: 86.7 (projected)
- 2026: 82.8 (projected)
- 2027: 75.0 (projected)
- 2028: 71.1 (projected)
- Nominal GDP (market prices; in millions of EC$):
- 2019: 2,458
- 2020: 2,334
- 2021: 2,399
- 2022: 2,671
- 2023: 2,924
- 2024: 3,168 (projected)
- 2025: 3,344 (projected)
- 2026: 3,501 (projected)
- 2027: 3,666 (projected)
- 2028: 3,838 (projected)
- 2029: 4,018 (projected)
International Monetary Fund — Press Release No. 24/285 (July 22, 2024).
