Press Release: Statement by IMF Staff Mission on the 2005 ECCU Regional Discussions
April 29, 2005
The following statement was issued on April 28, 2005 at the Eastern Caribbean Central Bank (ECCB) in St. Kitts and Nevis by an International Monetary Fund (IMF) staff mission to the Eastern Caribbean Currency Union (ECCU) countries:
"An IMF mission visited the ECCU region recently to conduct the IMF's 2005 ECCU regional discussions. The mission met with the national and regional authorities in the six IMF member countries of the ECCU-Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines-and members of civil society in each country, as well as with key regional institutions, including the Eastern Caribbean Central Bank (ECCB), the Organization of Eastern Caribbean States (OECS), and the Caribbean Development Bank. The concluding meeting was held at the ECCB this morning to present the mission's assessment of the economic situation and prospects, as well as policy recommendations for consideration by the member countries of the ECCU. Subsequently, a report reflecting the IMF mission's policy discussions with the authorities will be prepared and presented to the 24-member Executive Board of the IMF in July.
"The regional discussions focused on recent economic developments and prospects, challenges, and opportunities facing the ECCU, and are intended to complement and strengthen the bilateral Article IV consultation that the IMF holds with the individual ECCU member countries.
"Despite a very damaging hurricane season, economic activity remained robust in 2004 and is expected to continue growing in 2005. Growth has been driven by construction and a sharp revival of tourism. While the impact of Hurricane Ivan on Grenada was devastating, there was limited damage in the remaining ECCU countries which grew by an average of about 4 percent. In view of the continued growth in the region's major tourism markets-the United States and the United Kingdom-a similar growth rate is projected for the ECCU this year. Supported by the regional monetary arrangement at the ECCB, inflation remains low and external foreign currency reserves have risen.
"Public debt has risen in most countries, averaging nearly 115 percent of GDP in the IMF member countries. Cross-country studies have shown that high debt levels hinder growth; moreover, credible and sustained fiscal consolidation has gone hand in hand with higher growth. "The ECCU authorities have already expressed their intention to reduce the high public debt levels through a combination of fiscal consolidation, growth, asset sales, and debt management, and many are already working towards achieving this goal. In this context, the mission commends the bold steps, such as the introduction of Personal Income Tax in Antigua and Barbuda, the announcement of the closure of the sugar industry in St. Kitts and Nevis, and fiscal consolidation achieved in Dominica.
"Looking forward, the global environment facing the region is changing: oil prices are likely to remain at a very high level, official development assistance to the region has been declining, trade preferences for bananas and sugar exports are eroding, global interest rates are rising, and natural disasters continue to hit the region regularly. The economies need to adapt to the changing times.
"On the positive side, globalization has afforded significant opportunities to raise growth rates and reduce unemployment and poverty. There is scope for expanding in non traditional areas in services, increasing the linkages between agriculture and tourism, strengthening local skills, tapping the OECS diaspora to invest domestically, and enhancing regional cooperation that facilitates global integration. At the same time, preserving macroeconomic stability, enhancing competitiveness, and improving the domestic investment climate are needed to exploit the global opportunities.
"We wish the authorities every success in their endeavor to meet these challenges and exploit the opportunities to raise growth rates in the region."