Preliminary findings suggest that the Vincentian economy registered “modest growth” in 2014, but the government is having difficulties meeting its obligations and keeping the budget together, Elie Canetti, International Monetary Fund (IMF) advisor, Western Hemisphere, told reporters in Kingstown on Tuesday.
“We are still working to finalise the numbers, but it looks as if there has been some modest growth in 2014,” Canetti said during a joint press briefing with Prime Minister and Minister of Finance Ralph Gonsalves at the end of the IMF’s article IV consultations, held over the last two weeks.
He said that his team has been looking at the impact on the economy of the December 2013 floods.
“And obviously, that at least in the first instance, had an impact, an adverse effect,” he said, adding that the extreme weather destroyed a lot of banana trees as well as fishing boats.
Canetti said his team looked at all sectors of the economy, but was particularly focused on what is happening with construction sector.
He noted that a there is a lot of construction activity because of the Argyle International Airport, and reconstruction of infrastructure destroyed by the floods.
“While the flood event itself was actually a disaster and terrible for any country to face something like that, what we typically find in countries where there have been a natural disaster, the rebuilding effort itself actually helps growth pick up, and so we have looked into that,” he told reporters.
“On balance, I think that the floods probably have impacted growth somewhat negatively this year, but, beyond that, I think there is underlying momentum in the economy.”
The IMF officials said that the consultations also examined what is expected to happen to the Vincentian economy in the medium term.
“And there we see a lot of positive signs. And the airport looms large in our thinking,” he said, adding that a new airport generally impact positively small economies that depend on tourism.
“It really does unlock a lot of tourism potential,” he said, adding that the IMF is “trying to understand what the tourism strategy is more generally.
“A key element that we are looking for is to see if once investors can see that the airport is really nearing completion, would we get a lot of investment in things like hotels, tour operators and also have airlines come to take advantage of the new airport?
“So, it is a little bit early in that regard to make an assessment, but, having spoken with a number of groups involved in tourism both in the private and public sector, I think there is going to be considerable interest in St. Vincent and the Grenadines once the airport opens.
“So, we are looking for reasonably substantial pickup in growth, probably starting in 2016 when we expect the airport will be in full operation,” Canetti said.
He, however, noted that the IMF focuses a lot on fiscal sustainability, adding that his team had many discussions with the Ministry of Finance to try to understand the fiscal situation of the country.
Canetti pointed out that in addition to the floods, the country has faced two hurricanes and several droughts over the past few years, and added that these natural disasters are very difficult to cope with, especially for a country as small as St. Vincent and the Grenadines (SVG).
“Our sense is there has been a difficult challenge in trying to keep the budget together, keeping debt moderate, and indeed, we have seen debt growing.
“And indeed, we have seen some signs of fiscal stress. There seems to be an increase in arrears that the government is having, in some cases, more difficulties meeting its obligations, but we have also looked a lot at the plans going forward, and so we have stressed to the Prime Minister and to other officials the need to put in place a medium term plan so that the debt situation can be turned around.
“And I think we have had fair discussions about what some of the elements of that policy could be, looking over the next five years,” he said.
“I would say it is not a dire situation here, there are other countries in the Caribbean where we have much greater concerns, but here, at the moment, the debt looks manageable, so it is important that actions be put in place to make sure that the debt measure as a per cent of the economy actually comes down over the medium terms,” Canetti told reporters.
He said the IMF is also focusing on the cost of energy, as this is an important element to economic growth across the Caribbean.
Domestic consumers of electricity in SVG pay a base rate of EC$0.50 per kilowatt-hour of electricity consumed, plus fuel surcharge and taxes of comsumption in excess of 200 KWh per month.
“The situation here, is in some sense not as bad, not as much of an obstacle, as elsewhere,” Canetti said.
“We are pleased to say that the pricing regime here is conducive to things like conservation, so we don’t think that a lot of energy is being wasted because energy is priced too cheaply. That is a problem in many countries across the world where they provide heavy energy subsidies, which, of course, are popular with consumers but ultimately lead to over consumption and the problems associated with that,” Canetti said, adding that his team thinks that the state-owned electricity company, VINLEC, is “fairly well-run”, and its plants and equipment “fairly modern”.
Cannetti said IMF agrees with the government that the best forward for the energy sector is to look into the various forms of renewable energy, the most promising of which, he said, seems to be geothermal energy.
The government has partnered with the Clinton Global Foundation and an Icelandic firm to explore SVG’s geothermal energy potential.
“I think the broad message is that there is probably not a lot that can be done about energy cost in the short term. In the long term, as geothermal and other renewables become viable, that will hopefully help to bring the cost of energy down, and that could provide a significant boast to the economy,” Canetti said.
He said that of special importance for the future, because of climate change and the likelihood of higher intensity hurricanes, the IMF is trying to understand the elements of government policy that will try to make the economy more resilient should there be future natural disaster
“And it would be miraculous if you didn’t have another natural disaster over the next decade. That seems to be the frequency of occurrence — once every decade, but it has been more frequent lately.
“So, we’ve looked a lot into what are the elements of physical resilience that are being put in place,” he said.
To illustrate, Canetti said his teams looked into the reconstruction of bridges damaged during the disaster last Christmas which are being re-built to much stronger and higher standards.
The team also met with the Ministry of Agriculture and other ministries to try to understand some of the programmes they have to deal with slope stabilisation, re-channelling river, and reallocating houses in the path of future floods.
“So, we feel a lot’s going on, but a lot has to be done and a lot more will be done and also the World Bank and the Caribbean Development Bank are contributing to that. So, that’s something I would say we will be monitoring closely.”
Meanwhile, Gonsalves said he was pleased with the IMF findings.
“I am pleased that the IMF has found that despite all the challenges we have had, there is modest growth…” he said.
“I think that is an assessment that will resonate with Vincentians, and you have done that assessment independently, taking into account comparative island states,” he said, adding that his government has a debt management strategy, which it updates all the time
“I want to thank you for your comments on the big issue of renewable energy, particularly geothermal, which is potentially a game changer … It’s good when we have independent persons come in and do assessments. As you know, I don’t always agree with the IMF on everything,” Gonsalves said.
“As a member of the IMF, … it is important for us to work closely with the IMF, the World Bank and other international financial institutions, regional ones, simply because we need them to be with us as we try to have sustainable development for the betterment of the lives of our people,” Gonsalves told the press briefing.
I am very intrigued by the IMF’s assessment of the impact of the airport on completion. I wonder if the any of the so-called journalists asked a question along the following lines. “Hasn’t economic history regarding the impacts of major airports projects, especially in small states, revealed that there is a significant lag time between the completion of the airport and the results that may flow directly from its presence, and that any such results are usually, in the first round, contingent on substantial additional expenditure on the part of the Government to attract investors and airlines? And even when such expenditure is undertaken, there is no guarantee of sustained results, unless there are supporting arrangements and physical attributes in place?” And a follow up question – ” What has been the experience of Grenada, and the early experience of St. Kitts/Nevis in this regard?” It would have been very interesting to hear the response of the IMF team. I really do think that there is need for some realism on this airport impact issue, and a reduction of the high expectations that are being promoted!
So, we are looking for reasonably substantial pickup in growth, probably starting in 2016 when we expect the airport will be in full operation, Canetti said. — Well not even the IMF buy into the December 2014 substantial completion and operational by mid 2015.
As a patriot am pleased with the IMF report on the Vincentian ECONOMY. Each time the Prime minister gives an update on the economy, most people has negative comments to make. Well I’ve read the report myself and is very much in support of what they’ve outlined in their findings. But some who claimed they are patriots, continues to speaks negative things about SVG because of political blindness. This is welcomed news.
So the moral of this statement is that prior to 2001 all the ULP persons that were making negative comments about the then NDP government were non-patriotic? So it appears patriosim in SVG mirrors is only open to those supporting the ruling party…….interesting., we live and we learn
The December floods destroyed “a lot of banana trees as well as fishing boats.” Did I just read that? Which part of the country did this take place because I was intimately involved in covering this disaster. Could anyone please help me?
“Modest growth”, funny he couldn’t give a number, under the NDP 5.5% growth was unacceptable, as far as Ralph was concern.
“The government is having difficulties meeting its obligations and keeping the budget together.”, in other words the ECONOMY is being miss managed.
“He noted that a there is a lot of construction activity BECAUSE of the Argyle International Airport, and reconstruction of infrastructure destroyed by the floods”. So construction is down in the rest of the country, because Argyle money is mainly going to the Cubans and the Ecuadorians are rebuilding the infrastructure.
” What we typically find in countries where there have been a natural disaster, the rebuilding effort itself actually helps growth pick up”, looks like without disaster’s SVG wouldn’t have modest growth.
“So, we are looking for reasonably substantial pickup in growth, probably starting in 2016 when we expect the airport will be in full operation”. This ECONOMY is been built on hopes and dreams, instead of ways and means.
“Our sense is there has been a difficult challenge in trying to keep the budget together, keeping debt moderate, and indeed, we have seen debt growing”. Again the modest growth is being offset by growing debt. (PRESSURE)
“The Prime Minister and to other officials the need to put in place a medium term plan so that the debt situation can be turned around”. Looks like wages staying frozen and taxes going up. (MORE PRESSURE)
THIS IS JUST THE IMF’S WAY OF SAYING YOUR CREWED.
The mandate of the IMF, a branch institution of the United Nations, is to promote high employment and sustainable economic growth, and reduce poverty around the world by tracking the economic health of its member countries, alerting them to risks on the horizon and providing policy advice. It also lends to countries in difficulty, and provides technical assistance and training to help countries improve economic management.
It seems to be trying to fulfill parts of this mandate in the presentation above, save with regard to the Argyle airport about which it is as much in the dark as the rest of us.
This is partly because the IMF, its sister institution the World Bank, and many other government and NGO bodies have generally supported political regimes and economic projects that have left the countries concerned worse off (see Dambisa Moyos Dead Aid, 2009).
Given its track record, this is why everything the IMF says about Argyle airport, a project that it had no involvement with, is even more based on wishful thinking, not hard fact or careful analysis. Since the IMF was never invited to offer policy advice or technical assistance or economic management in the planning, funding, building, operation, or potential spin-offs of the airport, the luke-warm things it says about Argyle are empty rhetoric:
A key element that we are looking for is to see if once investors can see that the airport is really nearing completion, would we get a lot of investment in things like hotels, tour operators and also have airlines come to take advantage of the new airport? So, it is a little bit early in that regard to make an assessment, but, having spoken with a number of groups involved in tourism both in the private and public sector, I think there is going to be considerable interest in St. Vincent and the Grenadines once the airport opens . So, we are looking for reasonably substantial pickup in growth, probably starting in 2016 when we expect the airport will be in full operation.
These are words that are full of hope but devoid of substance.
As for the overall assessment of the strength of SVGs economy, to say that, The situation here, is in some sense not as bad, not as much of an obstacle, as elsewhere, is to damn SVG with faint praise given that the situation elsewhere is often hopeless.
No wonder the PM looks so glum in the photograph.
Let us once and for all throw into the junk bin this notion that anyone who raises legitimate questions is not a patriot! I stand below no one in my love for my homeland! But patriotism does not mean blind belief, loss of rationality, and the absence of the ability to think for oneself! If we continue down that road, then Stalin and Putin are great Russian patriots! Hitler and Goebels were great German patriots. And we could could go on. Recall the quote from Boswell in his dialogues with Dr. Johnson: ” Patriotism is the last refuge of a scoundrel”, to which he further clarified that he means ” pretended patriotism which so many, in all ages and countries, have made a cloak for self interest.” Therefore, those who point a finger of castigation at others, must remember that four are pointing back at them!
It amazes me how many of us are using the word patroitism, when in reality we don’t know or live up to what it means to be a patroit. Patroitism requires sacrifice and without sacrifice, all is dead.Part of being a patroit, is to stand up for our fellow vincentians. you can choose to have a constructive dialogue over any subject without cursing his mother…demand answers from our elected officials and having the guts to tell them when it’s to exit the political stage and give someone else a chance.. all this you can say without the fear of being a victim of political reprisal, and if this is not possible, why call ourselves patroits.
The IMF had good things to say about our economy while the NDP pour scorn, lies, and mischief on it. Who have eyes to see let them see. Who has ears to hear, let them hear.
You are right about seeing and hearing. You forgot to add one thing. ” Who feels it, knows it.” Time will tell soon enough.