{ "title": "St. Lucia: Staff Concluding Statement of the 2025 Article IV Mission", "publication": "IMF News, December 4, 2025", "sourceUrl": "https://www.imf.org/en/news/articles/2025/12/04/cs-st-lucia-staff-concluding-statement-of-the-2025-article-iv-mission", "canonical": "https://www.imf.org/en/news/articles/2025/12/04/cs-st-lucia-staff-concluding-statement-of-the-2025-article-iv-mission", "overlayPath": "/en/news/articles/2025/12/04/cs-st-lucia-staff-concluding-statement-of-the-2025-article-iv-mission/index.md", "summary": "An International Monetary Fund (IMF) staff mission, led by Ms. Swarnali Ahmed Hannan, concluded discussions as part of the 2025 Article IV consultation with the authorities of St. Lucia in Castries on November 3-14, 2025.", "publishDate": "2025-12-04", "sections": [ { "heading": "Mission overview and macroeconomic outlook", "content": "- IMF staff mission led by Ms. Swarnali Ahmed Hannan concluded discussions in Castries on November 3-14, 2025.\n- St. Lucia staged a robust recovery following the Covid-19 pandemic.\n- Growth projections and drivers:\n - Real GDP growth: 4.7 percent in 2024; projected 1.7 percent in 2025; rebound to 2.3 percent in 2026; then gradual decline toward potential of 1.5 percent.\n - Drivers in 2025: moderation in tourism due to temporary hotel closures and reduced airlift, largely offset by strong construction activities, domestic demand, and credit expansion.\n - Medium-term dynamics: tourism pickup in 2026 and completion of planned infrastructure and tourism-related projects contribute to rebound then gradual stabilization.\n- Inflation and external sector:\n - Consumer price index (average): -0.5 percent in 2024; projected 0.8 percent in 2025; 1.9 percent in 2026; 2.0 percent in 2027.\n - Despite improved net exports, current account deficit increased in 2024 from widening net income balances but is expected to decline over the medium term.\n - Staff assesses the external position in 2024 as broadly in line with the level implied by fundamentals and desirable policies." }, { "heading": "Risks to the outlook", "content": "- Downside risks:\n - Geopolitical tensions, escalating trade measures and prolonged policy uncertainty could dampen global activity, weaken tourism and FDI flows, and increase import costs.\n - Domestic risks include weaker-than-expected tourism and construction performance, and increased recognized NPLs that could depress credit growth.\n - A global slowdown triggered by escalating trade measures and prolonged uncertainty would weigh heavily on St. Lucia due to dependence on tourism and reliance on imports; weaker demand from key tourism markets would dampen growth and fiscal revenues with negative spillovers.\n- Upside risks:\n - Stronger-than-expected growth in tourism, construction, and public investment." }, { "heading": "Fiscal outlook and priority reforms", "content": "- Fiscal and debt projections:\n - The fiscal balance improved in FY2024/25 mainly from lower capital expenditure.\n - Overall fiscal deficit (excl. natural disaster costs) is expected to narrow to 2.3 percent of GDP by FY2030/31.\n - Public debt projected to stabilize at around 77 percent of GDP in the medium term (projection pencils in natural disaster costs).\n - Gross financing needs will remain elevated implying continued high rollover risks.\n- Overarching fiscal priority:\n - Reduce public debt and create room for capital spending through revenue-based measures.\n - Current policies keep public debt stable but fall short of regional debt target of 60 percent by 2035.\n- Recommended three-pillared adjustment approach:\n - (i) Comprehensive tax reform and enhanced tax administration—starting now and implemented gradually over the medium term.\n - (ii) Improved control and targeting of current expenditures.\n - (iii) Adoption of a sound fiscal rule within a fiscal responsibility framework.\n- Tax reform specifics:\n - Tax measures: (i) rationalizing corporate income tax incentives, particularly in the hospitality sector; (ii) broadening the VAT base, lowering thresholds, limiting zero-rated items, and introduction of VAT on digital services—accompanied with targeted support to vulnerable households; (iii) improving personal income tax progressivity; (iv) shortening property exemptions; and (v) reforming fuel taxes and increasing excises on alcohol and tobacco.\n - Tax administration measures: strengthening audit and inspection; accelerating digitalization of processes; enhancing compliance and improving transparency. The tax amnesty should not be renewed further.\n- Spending efficiency and rebalancing:\n - St. Lucia spends more on public sector wages, goods and services, and debt interest than the Latin America and Caribbean average, but less on capital.\n - Shift focus to capital and social spending, control compensation of employees, and increase resources through revenue measures.\n - Strengthen PPPs framework through transparent reviews and sound institutional structures.\n - Use digital technologies to modernize public administration, improve service delivery, enhance targeting of transfers, and promote inclusive growth.\n- Pensions and NIC projections:\n - NIC expenditures projected to exceed income by 2035, with reserve depletion by 2051.\n - Restoring actuarial balance will require parametric or structural reforms, including higher contribution rates, lower replacement rates, increasing the retirement age, introducing pension caps, and/or voluntary investment options.\n- Medium-term fiscal framework and CIP:\n - Publish an MTFF prior to the annual budget with at least three years’ projections, a fiscal risk statement, a debt sustainability analysis, and policy scenarios.\n - Examine operational fiscal rules, such as a legal floor on the primary balance and a ceiling on current expenditures, with narrowly defined escape clauses for natural disasters and external shocks.\n - Improve CIP governance and transparency: simplify fund transfers to the Treasury and save proceeds in a separate fund for planned public investment and self-insurance against natural disasters.\n - Note: Government has approved creation of the first sovereign wealth fund financed by CIP proceeds to support sustainable economic development and climate resilience; authorities are taking regionally coordinated steps to strengthen investor screening and CIP integrity, including a new regulatory body." }, { "heading": "Financial sector resilience and supervisory priorities", "content": "- Banking sector fundamentals:\n - The banking sector is well-capitalized and highly liquid, but NPLs remain elevated despite recent improvements.\n - Real credit to the private sector rebounded by 5.6 percent in 2024, the highest in fifteen years, primarily driven by commercial real estate lending.\n - Credit unions continue to expand lending, but many have yet to comply with regulatory capital requirements.\n- Commercial real estate (CRE) lending:\n - CRE loans accounted for 7.4 percent of total loans as of Q1 2025; rapid pace and scale of increase warrant close monitoring.\n - Recommendation: review lending standards and employ stress testing to assess institutional resilience to adverse shocks.\n- Supervisory and regulatory priorities:\n - Ensure full compliance with ECCB 60 percent provisioning requirement for NPLs and avoid excessive reliance on general reserves.\n - For persistently high NPLs, reinforce oversight to promote timely write-offs or restructuring, supported by stronger supervisory enforcement and targeted incentives.\n - Strengthen market infrastructure: capitalize the Eastern Caribbean Asset Management Corporation (ECAMC) and establish a property cadaster to facilitate asset disposal and revive the secondary real estate market.\n - Banks should pursue prudent foreign investment strategies focused on high-grade securities.\n- Foreclosure and credit markets:\n - Complementary foreclosure legislation recommended to secure real estate mortgages while embedding borrower protections (pre-foreclosure negotiations, fair market value safeguards, access to judicial review).\n - Recent legislation strengthened debtor rights and movable asset financing; introducing foreclosure legislation would promote bank lending, reduce cost of credit, and foster market development.\n- Credit unions and deposit insurance:\n - Build on the new Co-operative Societies Act to develop and enforce prudential standards, streamline provisioning rules, and align with ECCB practices.\n - Extend asset quality reviews and stress testing progressively to other credit unions.\n - Priority: establish a regionally coordinated deposit insurance system for banks within the ECCU and gradually include credit unions.\n- Insurance sector and disaster risk:\n - Strengthening insurance sector resilience is critical given exposure to natural disasters and climate-related risks.\n - Local insurers exhibit lower property reinsurance retention ratios and premium levels compared to ECCU peers, limiting profitability amid rising reinsurance rates.\n - Recommendation: pursue a more integrated regional supervisory framework to enhance oversight, narrow insurance protection gap, and support affordability.\n- AML/CFT and CIP-related risks:\n - Continue efforts to mitigate Money Laundering/Terrorism Financing (ML/FT) risks; 2025 National Risk Assessment process expected to improve understanding and help develop targeted measures, including associated with the CIP scheme.\n - Progress needed to ensure financial institutions apply appropriate AML/CFT measures through effective risk-based supervision.\n - Address remaining gaps: increase entity transparency and strengthen oversight of higher risk designated non-financial businesses and professions, such as real estate agents and lawyers." }, { "heading": "Structural reforms to boost growth and resilience", "content": "- Supply-side bottlenecks and policy sequencing:\n - Key constraints: high finance costs and limited access to credit, inadequate workforce education, difficulties complying with tax and customs regulations.\n - Tackling these obstacles could improve productivity and potential growth; implementation should be sequenced and leverage regional coordination and ongoing initiatives in digitalization, climate adaptation, and energy transition.\n- Labor market and social protection:\n - Strengthen labor market institutions; the proposed unemployment insurance scheme is an important step to strengthen social protection and labor market resilience.\n - Recent introduction of a minimum wage provides a safeguard for low-income workers but requires careful monitoring to support vulnerable groups without hampering employment or competitiveness.\n- Digitalization and human capital:\n - Sustain digitalization to unlock long-term growth: expand internet connectivity, strengthen digital literacy, encourage innovation, and advance education in digital technologies to support job creation, economic diversification, and foreign investment.\n- External connectivity, trade, and diversification:\n - St. Lucia is significantly open with international trade comprising more than 100 percent of GDP, mainly exports of services (tourism) and imports of goods.\n - Import concentration increases living costs and external vulnerability.\n - Policy measures: streamline customs procedures, reduce freight and shipping costs, and enhance market competition.\n - Tourism and export broadening: expand into new source markets and broaden economic base beyond tourism.\n - Proactively seek trade opportunities in cooperation with OECS and CARICOM partners to support sustainable reorientation of trade networks.\n- Climate adaptation, energy transition, and insurance:\n - Continue climate adaptation and energy transition efforts; recent reforms include revision of land-use regulations, adoption of a Disaster Risk Financing Strategy, and establishment of a contingent credit line through the World Bank’s Catastrophe Deferred Drawdown Option (CAT DDO).\n - Address climate insurance protection gaps: schemes must address basis risk, maintain affordability via targeted subsidies, and improve climate data systems." }, { "heading": "Selected social and economic indicators (2021–30)", "content": "- Real GDP growth (at market prices, percent):\n - 2021: 11.3\n - 2022: 20.6\n - 2023: 3.3\n - 2024: 4.7\n - 2025: 1.7\n - 2026: 2.3\n - 2027: 1.8\n - 2028: 1.6\n - 2029: 1.5\n- Consumer price index (average, change in percent):\n - 2021: 2.4\n - 2022: 6.4\n - 2023: 4.5\n - 2024: -0.5\n - 2025: 0.8\n - 2026: 1.9\n - 2027: 2.0\n- Primary fiscal balance (excl. ND) 1/ 2/:\n - 2021: -2.2\n - 2022: 1.0\n - 2023: 0.2\n - 2024: 0.3\n - 2025: 0.9\n - 2026: 1.1\n - 2027: 1.2\n- Primary fiscal balance (incl. ND) 1/ 2/:\n - 2021: 0.1\n - 2022: 0.4\n - 2023: 0.6\n- Overall fiscal balance (excl. ND) 1/ 2/:\n - 2021: -5.4\n - 2022: -2.5\n - 2023: -3.2\n - 2024: -1.8\n - 2025: -2.9\n - 2026: -2.7\n - 2027: -2.6\n - 2028: -2.3\n- Overall fiscal balance (incl. ND) 1/ 2/:\n - 2021: -3.3\n - 2022: -3.0\n- Public sector debt (percent of GDP) 2/ 3/:\n - 2021: 81.9\n - 2022: 73.9\n - 2023: 75.2\n - 2024: 76.7\n - 2025: 77.2\n - 2026: 77.1\n - 2027: 77.0\n- Credit to private sector growth (real):\n - 2021: -4.4\n - 2022: -1.6\n - 2023: 5.6\n - 2024: 4.2\n - 2025: 3.1\n - 2026: 1.4\n- External current account balance:\n - 2021: -11.3\n - 2022: -3.6\n - 2023: -2.1\n - 2024: -1.4\n - 2025: -1.1\n\nInternational Monetary Fund staff.\n\n---\n\n\n References\n\n- St. Lucia and the IMF\n- IMF Policy Advice -- A Factsheet\n- Mission Concluding Statements\n- PRESS CENTER\n- Article IV\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2025/12/04/cs-st-lucia-staff-concluding-statement-of-the-2025-article-iv-mission" } ], "bullets": [ "[Markdown version](/en/news/articles/2025/12/04/cs-st-lucia-staff-concluding-statement-of-the-2025-article-iv-mission/index.md)", "[Structured JSON version](/en/news/articles/2025/12/04/cs-st-lucia-staff-concluding-statement-of-the-2025-article-iv-mission/index.json)", "[Bundle manifest](/en/news/articles/2025/12/04/cs-st-lucia-staff-concluding-statement-of-the-2025-article-iv-mission/bundle-manifest.json)", "Published: December 4, 2025", "IMF staff mission led by Ms. Swarnali Ahmed Hannan concluded discussions in Castries on November 3-14, 2025.", "St. Lucia staged a robust recovery following the Covid-19 pandemic.", "Growth projections and drivers:", "Inflation and external sector:", "Downside risks:", "Upside risks:", "Fiscal and debt projections:", "Overarching fiscal priority:", "Recommended three-pillared adjustment approach:", "Tax reform specifics:", "Spending efficiency and rebalancing:", "Pensions and NIC projections:", "Medium-term fiscal framework and CIP:", "Banking sector fundamentals:", "Commercial real estate (CRE) lending:", "Supervisory and regulatory priorities:", "Foreclosure and credit markets:", "Credit unions and deposit insurance:", "Insurance sector and disaster risk:", "AML/CFT and CIP-related risks:", "Supply-side bottlenecks and policy sequencing:", "Labor market and social protection:", "Digitalization and human capital:", "External connectivity, trade, and diversification:", "Climate adaptation, energy transition, and insurance:", "Real GDP growth (at market prices, percent):", "Consumer price index (average, change in percent):", "Primary fiscal balance (excl. ND) 1/ 2/:", "Primary fiscal balance (incl. ND) 1/ 2/:", "Overall fiscal balance (excl. ND) 1/ 2/:", "Overall fiscal balance (incl. ND) 1/ 2/:", "Public sector debt (percent of GDP) 2/ 3/:", "Credit to private sector growth (real):", "External current account balance:", "[St. Lucia and the IMF](http://www.imf.org/external/country/LCA/index.htm)", "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)", "[Mission Concluding Statements](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[Article IV](https://www.imf.org/external/pubs/ft/aa/index.htm)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2025/12/04/cs-st-lucia-staff-concluding-statement-of-the-2025-article-iv-mission/index.md", "json": "/en/news/articles/2025/12/04/cs-st-lucia-staff-concluding-statement-of-the-2025-article-iv-mission/index.json", "bundleManifest": "/en/news/articles/2025/12/04/cs-st-lucia-staff-concluding-statement-of-the-2025-article-iv-mission/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T04:18:22.390Z" }