{
  "title": "IMF Executive Board Concludes 2021 Article IV Consultation with Dominica",
  "publication": "IMF News, February 14, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/02/14/pr2235-imf-executive-board-concludes-2021-article-iv-consultation-with-dominica",
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  "summary": "GDP is estimated to have contracted by 11 percent in 2020 and is expected to recover modestly to 3.7 percent in 2021.",
  "publishDate": "2022-02-14",
  "sections": [
    {
      "heading": "Economic impact of the COVID-19 pandemic",
      "content": "- GDP is estimated to have contracted by 11 percent in 2020 and is expected to recover modestly to 3.7 percent in 2021.\n- Output decline driven by a sharp reduction in tourism and related sectors.\n- Decline contained by strong growth in the construction sector stemming from the large public investment program through 2020-21, financed by exceptionally high revenue from the Citizenship by Investment (CBI) program."
    },
    {
      "heading": "Fiscal situation",
      "content": "- Sharp decline in tax revenue and increase in health spending and social transfers led to large fiscal deficits in 2020 and 2021.\n- Public debt peaked at an estimated 106 percent of GDP in 2020.\n- Current account deficit estimated around 30 percent of GDP in 2020-21, owing to loss of tourism exports and an increase in imports related to higher public investment and commodity prices—despite a decline in private demand for imports.\n- Directors underscored importance of maintaining momentum on fiscal consolidation given the increase in public debt during the pandemic.\n- Welcomed approval of the Fiscal Responsibility Act to support reduction of public debt and achievement of the regional debt target.\n- Recommended creating space for investment focused on building resilience to natural disasters and prioritizing expenditure efficiency measures, including a civil service reform and better targeting of social transfers.\n- Encouraged measures to improve tax administration and broaden the tax base.\n- Stressed prudent use of Citizenship by Investment (CBI) revenue: encouraged saving part of CBI revenue for self-insurance against natural disasters and public debt reduction; securing additional insurance as part of a layered insurance framework recommended to cover losses from large and extreme disasters."
    },
    {
      "heading": "Financial sector",
      "content": "- Financial sector remained liquid and stable during the pandemic, but Non-Performing Loans (NPLs) remain above prudential benchmarks.\n- Loan service moratoria authorized by banks and credit union regulators supported firms and households, containing deterioration in portfolio performance.\n- Directors noted long-standing sectoral vulnerabilities, including high non-performing loans and capital adequacy gaps.\n- Welcomed banks’ plans to strengthen capital buffers to meet increasing loan-loss provisioning requirements.\n- For the non-bank sector, highlighted importance of addressing capital and liquidity requirements and strengthening supervision.\n- Encouraged maintaining progress on strengthening the AML/CFT framework to minimize risk to correspondent banking relationships.\n- Noted that weakness in the financial sector, particularly the credit unions, could amplify downside risks."
    },
    {
      "heading": "Outlook and risks",
      "content": "- Medium-term growth expected to recover underpinned by return of tourism, expanding hotel capacity, and high public investment in infrastructure resilient to natural disasters financed by CBI revenue.\n- Risks skewed to the downside, including renewed worldwide and domestic Covid-19 contagion waves; CBI revenue and/or official financing below projected levels, which would slow public investment and economic activity.\n- Weakness in the financial sector could amplify downside risks.\n- Urged continued efforts to contain the pandemic and support recovery in the near term, including addressing vaccine hesitancy."
    },
    {
      "heading": "Executive Board assessment and structural reform priorities",
      "content": "- Executive Directors commended authorities for pandemic response to support households and businesses.\n- Encouraged sustained reforms to ensure debt sustainability, strengthen the financial sector, and improve climate resilience.\n- Encouraged implementation of structural reforms aimed at reducing informality and fostering inclusive, sustainable growth.\n- Noted that progress on structural reforms that boost competitiveness and build resilience to natural disasters, along with fiscal consolidation, would help strengthen external sustainability."
    },
    {
      "heading": "Key statistics (Dominica: Selected Economic Indicators, 2018–22)",
      "content": "- Real GDP (annual percent change): 2018: 3.5; 2019: 7.5; 2020: -11.0; 2021 (Est.): 3.7; 2022 (Projected): 7.6.\n- Nominal GDP (annual percent change): 2018: 4.6; 2019: 9.1; 2020: -11.6; 2021: 6.8; 2022: 10.3.\n- Consumer prices, period average: 2018: 1.0; 2019: 1.5; 2020: -0.7; 2021: 3.0; 2022: 2.5.\n- Central government revenue (percent of GDP): 2018: 44.2; 2019: 38.1; 2020: 55.5; 2021: 49.9; 2022: 46.5.\n- Taxes (percent of GDP): 2018: 27.4; 2019: 23.2; 2020: 21.9; 2021: 21.3; 2022: 23.0.\n- Non-tax revenue (percent of GDP): 2018: 16.0; 2019: 13.0; 2020: 31.3; 2021: 26.3; 2022: 21.2.\n- Expenditure (percent of GDP): 2018: 62.1; 2019: 46.2; 2020: 62.7; 2021: 59.3; 2022: 48.4.\n- Current primary expenditure (percent of GDP): 2018: 35.9; 2019: 34.5; 2020: 34.4; 2021: 32.4; 2022: 30.9.\n- Interest payments (percent of GDP): 2018: 2.4; 2019: 2.0; 2020: 2.2.\n- Capital expenditure (percent of GDP): 2018: 24.4; 2019: 9.3; 2020: 24.9; 2021: 15.4.\n- Primary balance (percent of GDP): 2018: -16.0; 2019: -5.8; 2020: -5.2; 2021: -7.4; 2022: 0.3.\n- Primary balance, excluding CBI (percent of GDP): 2018: -29.1; 2019: -17.5; 2020: -34.7; 2021: -31.9; 2022: -18.7.\n- Overall balance (percent of GDP): 2018: -17.9; 2019: -8.2; 2020: -7.2; 2021: -1.8.\n- Central government debt (incl. guaranteed, percent of GDP): 2018: 84.6; 2019: 94.2; 2020: 106.0; 2021: 100.9; 2022: 100.3.\n  - External debt (percent of GDP): 2018: 52.4; 2019: 54.7; 2020: 66.7; 2021: 64.2; 2022: 66.5.\n  - Domestic debt (percent of GDP): 2018: 32.2; 2019: 39.5; 2020: 39.3; 2021: 36.8; 2022: 33.8.\n- Broad money (M2, annual percent change): 2018: 1.4; 2019: -6.3; 2020: -9.9; 2021: 1.6; 2022: 5.6.\n- Real credit to the private sector (annual percent change): 2018: -5.3; 2019: -6.1; 2020: 0.4; 2021: -1.3.\n- Current account balance (percent of GDP): 2018: -42.4; 2019: -37.9; 2020: -30.0; 2021: -31.4; 2022: -28.7.\n- Exports of goods and services (percent of GDP): 2018: 27.7; 2019: 35.0; 2020: 20.2; 2021: 20.0; 2022: 20.0.\n- Imports of goods and services (percent of GDP) 1/: 2018: 74.4; 2019: 78.0; 2020: 57.6; 2021: 52.8; 2022: 56.2.\n- Capital and financial account balance (percent of GDP): 2018: 14.7; 2019: -9.5; 2020: 2.6; 2021: 10.6.\n- FDI (percent of GDP): 2018: -13.6; 2019: -4.5; 2020: -6.7; 2021: -6.6.\n- Capital grants (percent of GDP): 2018: 26.1; 2019: 12.3; 2020: 26.6; 2021: 16.1; 2022: 21.0.\n- Other (incl. errors and omissions, percent of GDP): 2018: -15.7; 2019: -0.8; 2020: -6.8; 2021: -3.9.\n- External debt (gross, percent of GDP): 2018: 100.4; 2019: 93.5; 2020: 106.1; 2021: 101.9; 2022: 100.8.\n\nPress Release No. 22/35\n\n---\n\n\n References\n\n- Dominica and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/02/14/pr2235-imf-executive-board-concludes-2021-article-iv-consultation-with-dominica"
    }
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    "Published: February 14, 2022",
    "GDP is estimated to have contracted by 11 percent in 2020 and is expected to recover modestly to 3.7 percent in 2021.",
    "Output decline driven by a sharp reduction in tourism and related sectors.",
    "Decline contained by strong growth in the construction sector stemming from the large public investment program through 2020-21, financed by exceptionally high revenue from the Citizenship by Investment (CBI) program.",
    "Sharp decline in tax revenue and increase in health spending and social transfers led to large fiscal deficits in 2020 and 2021.",
    "Public debt peaked at an estimated 106 percent of GDP in 2020.",
    "Current account deficit estimated around 30 percent of GDP in 2020-21, owing to loss of tourism exports and an increase in imports related to higher public investment and commodity prices—despite a decline in private demand for imports.",
    "Directors underscored importance of maintaining momentum on fiscal consolidation given the increase in public debt during the pandemic.",
    "Welcomed approval of the Fiscal Responsibility Act to support reduction of public debt and achievement of the regional debt target.",
    "Recommended creating space for investment focused on building resilience to natural disasters and prioritizing expenditure efficiency measures, including a civil service reform and better targeting of social transfers.",
    "Encouraged measures to improve tax administration and broaden the tax base.",
    "Stressed prudent use of Citizenship by Investment (CBI) revenue: encouraged saving part of CBI revenue for self-insurance against natural disasters and public debt reduction; securing additional insurance as part of a layered insurance framework recommended to cover losses from large and extreme disasters.",
    "Financial sector remained liquid and stable during the pandemic, but Non-Performing Loans (NPLs) remain above prudential benchmarks.",
    "Loan service moratoria authorized by banks and credit union regulators supported firms and households, containing deterioration in portfolio performance.",
    "Directors noted long-standing sectoral vulnerabilities, including high non-performing loans and capital adequacy gaps.",
    "Welcomed banks’ plans to strengthen capital buffers to meet increasing loan-loss provisioning requirements.",
    "For the non-bank sector, highlighted importance of addressing capital and liquidity requirements and strengthening supervision.",
    "Encouraged maintaining progress on strengthening the AML/CFT framework to minimize risk to correspondent banking relationships.",
    "Noted that weakness in the financial sector, particularly the credit unions, could amplify downside risks.",
    "Medium-term growth expected to recover underpinned by return of tourism, expanding hotel capacity, and high public investment in infrastructure resilient to natural disasters financed by CBI revenue.",
    "Risks skewed to the downside, including renewed worldwide and domestic Covid-19 contagion waves; CBI revenue and/or official financing below projected levels, which would slow public investment and economic activity.",
    "Weakness in the financial sector could amplify downside risks.",
    "Urged continued efforts to contain the pandemic and support recovery in the near term, including addressing vaccine hesitancy.",
    "Executive Directors commended authorities for pandemic response to support households and businesses.",
    "Encouraged sustained reforms to ensure debt sustainability, strengthen the financial sector, and improve climate resilience.",
    "Encouraged implementation of structural reforms aimed at reducing informality and fostering inclusive, sustainable growth.",
    "Noted that progress on structural reforms that boost competitiveness and build resilience to natural disasters, along with fiscal consolidation, would help strengthen external sustainability.",
    "Real GDP (annual percent change): 2018: 3.5; 2019: 7.5; 2020: -11.0; 2021 (Est.): 3.7; 2022 (Projected): 7.6.",
    "Nominal GDP (annual percent change): 2018: 4.6; 2019: 9.1; 2020: -11.6; 2021: 6.8; 2022: 10.3.",
    "Consumer prices, period average: 2018: 1.0; 2019: 1.5; 2020: -0.7; 2021: 3.0; 2022: 2.5.",
    "Central government revenue (percent of GDP): 2018: 44.2; 2019: 38.1; 2020: 55.5; 2021: 49.9; 2022: 46.5.",
    "Taxes (percent of GDP): 2018: 27.4; 2019: 23.2; 2020: 21.9; 2021: 21.3; 2022: 23.0.",
    "Non-tax revenue (percent of GDP): 2018: 16.0; 2019: 13.0; 2020: 31.3; 2021: 26.3; 2022: 21.2.",
    "Expenditure (percent of GDP): 2018: 62.1; 2019: 46.2; 2020: 62.7; 2021: 59.3; 2022: 48.4.",
    "Current primary expenditure (percent of GDP): 2018: 35.9; 2019: 34.5; 2020: 34.4; 2021: 32.4; 2022: 30.9.",
    "Interest payments (percent of GDP): 2018: 2.4; 2019: 2.0; 2020: 2.2.",
    "Capital expenditure (percent of GDP): 2018: 24.4; 2019: 9.3; 2020: 24.9; 2021: 15.4.",
    "Primary balance (percent of GDP): 2018: -16.0; 2019: -5.8; 2020: -5.2; 2021: -7.4; 2022: 0.3.",
    "Primary balance, excluding CBI (percent of GDP): 2018: -29.1; 2019: -17.5; 2020: -34.7; 2021: -31.9; 2022: -18.7.",
    "Overall balance (percent of GDP): 2018: -17.9; 2019: -8.2; 2020: -7.2; 2021: -1.8.",
    "Central government debt (incl. guaranteed, percent of GDP): 2018: 84.6; 2019: 94.2; 2020: 106.0; 2021: 100.9; 2022: 100.3.",
    "Broad money (M2, annual percent change): 2018: 1.4; 2019: -6.3; 2020: -9.9; 2021: 1.6; 2022: 5.6.",
    "Real credit to the private sector (annual percent change): 2018: -5.3; 2019: -6.1; 2020: 0.4; 2021: -1.3.",
    "Current account balance (percent of GDP): 2018: -42.4; 2019: -37.9; 2020: -30.0; 2021: -31.4; 2022: -28.7.",
    "Exports of goods and services (percent of GDP): 2018: 27.7; 2019: 35.0; 2020: 20.2; 2021: 20.0; 2022: 20.0.",
    "Imports of goods and services (percent of GDP) 1/: 2018: 74.4; 2019: 78.0; 2020: 57.6; 2021: 52.8; 2022: 56.2.",
    "Capital and financial account balance (percent of GDP): 2018: 14.7; 2019: -9.5; 2020: 2.6; 2021: 10.6.",
    "FDI (percent of GDP): 2018: -13.6; 2019: -4.5; 2020: -6.7; 2021: -6.6.",
    "Capital grants (percent of GDP): 2018: 26.1; 2019: 12.3; 2020: 26.6; 2021: 16.1; 2022: 21.0.",
    "Other (incl. errors and omissions, percent of GDP): 2018: -15.7; 2019: -0.8; 2020: -6.8; 2021: -3.9.",
    "External debt (gross, percent of GDP): 2018: 100.4; 2019: 93.5; 2020: 106.1; 2021: 101.9; 2022: 100.8.",
    "[Dominica and the IMF](http://www.imf.org/external/country/DMA/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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