Economic activity in St. Vincent and the Grenadines (SVG) “appears to have recovered in 2015”, the International Monetary Fund (IMF) said last week after its Article IV Consultation.
The IMF said in a press release that this recovery was led by “strong tourism inflows and a rebound in construction” while inflation has trended down due to falling food and fuel prices.
The country’s recovery from the global financial crisis was hampered by a series of natural disasters, sluggish global demand and slow implementation of key infrastructure projects, the IMF said.
Lower oil prices have also narrowed the current account deficit, the IMF said, adding that the commercial banking sector appears to remain solid, enabling a modest uptick in credit to the private sector that has been supportive of economic recovery.
The international airport at Argyle, the nation’s first, is “now foreseen for completion in 2016”, according to the IMF, and this is expected to sustain the near-and medium-term economic growth.
The EC$729 million airport has missed completion deadlines annually since 2011, including June 2016.
“Real GDP is projected to expand by 2.2 percent in 2016 and reach 3.1 percent over the medium-term as tourist arrivals are boosted by greater airlift capacity and construction expands tourism infrastructure. The current account deficit is expected to narrow gradually, as tourism inflows increase. Additional imports to supply tourism services are expected to be financed by foreign direct investment.”
The IMF noted that the public debt has steadily increased since 2008, reading 74 per cent of GDP at end-2015.
This is due largely to the impact of the global financial crisis, construction of Argyle International Airport and rehabilitation spending in response to three back-to-back natural disasters.
“The authorities have committed to reducing public debt to the Eastern Caribbean Currency Union target of 60 per cent of GDP by 2030. They have made some progress towards consolidating the fiscal position since 2013, with a reduction of the primary deficit from 5 percent of GDP to an estimated 1.1 percent of GDP in 2015. Despite the new tax policy measures provided in the 2016 budget and the envisaged improvement in the primary balance, higher interest costs are expected to leave the fiscal position unchanged from 2015,” the IMF said.