As St. Vincent and the Grenadines waits anxiously to hear what fiscal package its new Minister of Finance, Camillo Gonsalves, will ask Parliament to approve on Feb. 5, Opposition Leader Godwin Friday says that the latest IMF report on the Vincentian economy is suggesting that there is hardship ahead.
Friday came to this conclusion based on the fact that the International Monetary Fund’s 2017 Article IV Consultation Staff Report for SVG says that the nation’s external debt repayment is higher as government is scheduled to repay EC$128 million on commercial loans that came due in 2017.
This amounts to 5.9 per cent of GDP and compares unfavourably with 2016 debt payments of EC$55 million — 2.7 per cent of GDP.
“Where is that money going to come from? That means that there is hardship ahead for us. Either increased taxes or the cutting of services of government to the people of St. Vincent and the Grenadines in 2018,” Friday told a press conference held by his New Democratic Party in Kingstown on Wednesday.
He noted that the IMF has said that SVG’s fiscal position is expected to deteriorate in 2017-18, as new revenue measures only partially cover higher outlays.
“Public debt will resume rising despite some debt relief. Moreover, risks to this projection are tilted to the downside given the inadequate policy stance, the uncertain global environment, and vulnerability to natural disasters.
“However, strong spillovers from the new airport, the construction of a modern port, and launching the geothermal project could support growth in the medium term,” said the Washington-based financial institution.
Friday noted the IMF’s use of the word “could”.
“You have to ask yourself, what is the status, for example, of the geothermal project. These are projects that are presented [by the government] to say ‘Well, listen, you are going to write your report, these are things that are in the pipeline, these are things that we are going to do, so factor these into your calculations and your projections and then tell us how we come out.
“How likely is it to contribute to growth in 2018,” Friday said of the geothermal project.
Friday said that the first observation is that the report reflects a negative situation on the Vincentian economy.
He said that the executive summary begins by saying, “Economic activity is expected to remain relatively flat in 2017 but recover in 2018 owing to enhanced connectivity with key tourism source countries.”
The opposition leader noted that enhanced connectivity refers to the Argyle International Airport, which began operating on Feb. 14, 2017.
Ten months after the opening, the airport received its first scheduled non-stop international flight.
The Air Canada Rouge Service from Toronto, which Kingstown is subsidising, will operate once weekly during the winter season until April 12, 2018, using an A319 aircraft with a capacity of 136 seats.
Friday said that when the IMF speaks of “‘flat’ growth in 2017, this refers to 1 per cent.
He further noted that the projected recovery in 2018 is 2.7 per cent.
“We would consider ordinarily a 2.1 per cent growth as anaemic growth. But that is the context in which the IMF has come to understand the economy of St. Vincent and the Grenadines.”
He noted that the growth of 2.1 per cent in 2018 is also premised upon the reopening of the Buccament Bay Resort.
“This is, obviously, a big assumption,” Friday said.
The resort has been closed since December 2016, when the state-owned power company cut its electricity connection amidst a major financial crisis at the resort, where workers had not been paid for months and millions are owed to the government and other creditors
Friday, who is also his party’s shadow minister for tourism, said that he has spoken to persons about the resort as he is keen to find out what is happening.
“And I have spoken to people who know what is happening and they said it is unlikely that the project will be open anytime soon. We do not know what is the situation with the hotel,” he said, adding that he has heard talk that an entity in Barbados may have leased it.
“When will it be ready for operations? Will substantial repairs be necessary? So all of these things have been factored in when you are thinking whether the 2.1 per cent, which we will agree is better than 1 per cent, but still anaemic in terms of economic growth, is going to be achievable, given the assumptions that are made by the IMF, based on the information presented,” Friday said.
Between 2009 and 2016, annual average economic growth in SVG was 0.2 per cent.
“Could you imagine that? That’s no growth at all,” Friday said.
“No wonder the people in this country are finding it so difficult. The economy, essentially, hasn’t grown, according to the IMF, during that period.”
He said that in a small economy like SVG, 7 to 8 per cent growth would be expected to generate “real employment and economic activity”.
“Large economies tend to grow 3-4 per cent, you consider that to be good growth,” he said, adding that China’s 7-10 per cent growth annually is “exceptional”.
“But in St. Vincent, 0.2 per cent average annual growth between 2009 and 2016.”
Friday said that the NDP has been vilified for its emphasis on curbing the national debt.
The IMF also said that government revenue is expected to decline for 2017 and transfers and capital outlays are expected to rise, resulting from, among other things, higher transfers to operate Argyle Airport and for buying back the Bank of St. Vincent and the Grenadines.
Very informative article Kenton! I am always amazed to read how Godwin Friday is so far ahead of our Prime Minister in Macro Economics. Both Ivan O’neal and Fridayhave the right answers but not this direction we are presently following. I have been saying since around 2007 that Gonsalves is doing everything wrong. To believe it is possible to spend and borrow a country into prosperity is madness, when we do not have the GDP to pay for it. Our PM promises jobs at every election but does not give the private sector any incentive to create jobs. Instead he continually raises taxes. Now all of the borrowing debt is beginning to come due. With Ralphonomics expect even higher taxes people. Maybe with our new Finance Minister we have to call it “Gonsalvonomics”
—Spend, Borrow and Tax with NO incentives for job creation in the Private Sector; that is Gonsalvonomics!
The economics of our government really have me frustrated. I cannot understand how it believes it can improve our situation by increasing our liabilities and eliminating our assets. We all know that even just to keep the airport operational it costs us much more to maintain than what it brings into our economy. Did they not know this before building it? Our PM calls that an asset! Even as the Boy Wonder has mentioned we pay rural constables but it is highly unlikely that they catch anyone stealing any crops. At the same time we turn around and eliminate irrigation worker’s jobs at a time when we are having prolonged periods of drought. The size of our Public Service has doubled since the ULP took over but our economy has declined. There is so much more mismanagement of our tax money done by this government but that is only a small mentioning.
Couple of truths that needs to be highlighted.The hardship in the IMF report was reflected for 2017, not 2018. The GDP for 2009-2016 was not unique to SVG regionally, but mostly due to a global recession. The US just recently saw GDP figures of 2.18% averaged between 2010-2016. Global recovery has just begun in recent years. China last figure, if it’s to be believed, was 6.9% a few days ago and it was the first time it has increased in seven years. Remember 2009-2016? Compared to other regional economies, SVG is holding it’s own. A small economies like SVG cannot achieve 7-8% growth without an industry. The only possible way to achieve this type of growth is tourism and this party and paper has railed against AIA non-stop. Investment needed to be made to create an industry. And the benefits won’t be seen overnight. SVG still need to create a tourism infrastructure. The Airport is just a start.
You very much need to read the essays written by C. ben David.
HC, you get yourself entangled in all sorts of voodoo economics when you try to justify the abysmal economic performance of the country in recent times. This government is a Borrow, Tax and Spend government. The indebtedness of the country would only exacerbate as the economic growth remains anemic. The airport would remain like an albatross around the government’s neck. The dance cannot pay for the lights. It’s all optics. For over ten consecutive years the country hasn’t experienced an economic growth north of 3%. The only things the incumbent government has given to the ordinary people are sustained poverty, political tribalism, high crime rate and everlasting indebtedness.
Instead of bringing dont the work of the goverment that did good and doing up drafts about this and that why not make your self a part of the solution and go around vincy and do up some solution and market research and presenting to the goverment of your finding of how they can boost. The economy stop posting negative stuff and wait for every bad thing that happen usa is so great the man they put in office was so. Rich and he is doing little to notthing to impact vincy. But #iwnews is focus daily on tumping the goverment bro .foreigner are reading yur articles your more causing. More popultion to vincy than the factory would produce gases and affect the eco system ..you need to stop this trash talk about vincy. Do you know the amount of tourist would love to visit your island ..question is toyou what are you doing to impact in vincy. Mr set your self straight you all have raw material but to Economy. You your self can use that same. Camera and post video pr what vincy have to offer and what can be improve get a job in that and not in breaking the country. Words are harass to others who see good in the development of the country. ..other admire vincy ..(julianpromo-wettybeats -bossraw hw is only 23 years old and he in more promotiong vincy than you -icandi-skinnyfabulous -ericascountry-style ) what sre you putting on the table currently check it but beating down the backs of the people who provided education to all open up to young people to get knowledge give free laptops what have these parents do with these laptops to ensure there kids use them proper nothing kids break them so often parents dont even take them in to repair they have them throw away cause its free nothings free do you know st.vincent and the grenadine is now on the map and infact the airport is wat placed it there ..if you want prove of that ill personally send you a picture of that prove. How much years or indenpendance and we have not been out there now we are so please leacve progress if your not willing to contribute to the building of whats already built and stop posting the good work like the airport that not only bew but modern to make your. Social media boost. Honestly feed u of your rambling and complaining
HC these individuals knows everything, namely Lostpet and C.Ben David. C. Ben struggling to attract an audience, but it seems like no one is paying this loser any mind. He has a few cheerleaders, the likes of Lostpet , and a few friends as well associatesl.
He has written pure garbage thus far. From day one I’ve been blasting this man, he’s a lair, thrust me. AIA has attracted thousands of likes as opposed to the DOOM and GLOOM which he’s been peddling for years. Since the opening of this beautiful facility, we’ve seen lots of private jets being parked at the AIA. E.T Joshua could not afford all these planes had it been in operation. They are not parking for free. Over the Christmas Season, the tarmac were filled. Not forget Canouan .
Our arrivals on the upward trend. Don’t take my word for it, check the STATS and you’ll see. How could I join with someone who continuously trashing SVG. The BIBLE says one ought to love their country. As I’ve stated before, AIA is here to stay and will continue to accomplished great things. C.Ben your mission will fail, you will never achieve anything. Continue to be the laughing stock on 784NEWS/IWN/CNN.
Lostpet(GOLD FISH) do you have any idea or understanding what you are talking about or you just a wagganis that just jump on issues because Ralph name comes up. Here you have factual figures in your face and you referring to an opinion piece for another. If you know you were gonna come face the hardship from Ralph why come to St. Vincent.
I dont think how much you explained to the people of this country, they would understand. They have to see Jesus Christ riding on a donkey through Kingstown for them to finally get it. This government has long overdue its mandate. There is no fresh ideas whatsoever. They collect their monthly salaries and the rest of us catch our asses.
I’m in Canada, but for the last 6 years I have spent three months of the winter in St Vincent. I used to spend a week or two in Bequia, but it’s much more expensive than the main island and there’s not much to do there. I mostly hike and snorkel. I’m tempted to get diver training. I’m not much of a lay on the beach and read, then go to a restaurant type. St Vincent is a paradise, but it’s taken 6 years to discover trails that aren’t on any maps. Most of the interior island is a wilderness, a very rough wilderness. You’re lucky you’re not on a hurricane path. I was going to go to Dominica this winter. What amazes me is your lack of infrastructure. You have water, lots of water. You have hydro, although virtually none that is solar or wind generated, but you have no roads, no marine reserves, no national parks of any sort. I bought a cutlass. Your trails aren’t maintained at all, except the forestry trails. Kingstown has virtually no sidewalks, no city parks, no planning in its development, traffic jams getting in and out of it. The cabs are too expensive, the public transportation inefficient and dysfunctional, and there’s no parking. Try and catch a bus from leeward or windward north end. It’s $100 US by cab. I love Vincentian culture, love your people, but if you want tourists, you’re going to have to a lot more than just build a few resorts, or else you’ll end up like Montego Bay in Jamaica. That said your roads should be a first priority. Tax people who have cars. Raise the cost of public transportation. Hire some good engineers. I live close to Toronto, about 60 miles, an hour’s drive. I haven’t been there in ten years, no reason to go. Why? Internet. Invest in your internet infrastructure and use it. Every bus route, every store, every tourist site, every trail, everything that anyone could possibly want, can be described and mapped on the internet. One final note. Your extra strong rum is too cheap, and your weed is illegal. Decriminalize marijuana. In Canada it’s going to be legal and sold in government stores July 1st this year. The only reason it’s illegal in St Vincent is the USA, and they don’t even like you very much. You used to let the Americans come in with dozens of helicopters to spray and burn small growers in the mountains. You do realize that St Vincent doesn’t have a helicopter? I would pay quite a lot to fly over the island in one as a tourist, but I’m not really a tourist. I’m a climate refugee. It is so bloody cold in Canada in the winter. If you establish a few marine reserves where absolutely no fishing of any sort is allowed, and police it, start opening and maintaining a few more trails, and not turn into Montego Bay, and I’ll be there four months of the year every year. And don’t develop an export lumber industry. Your forests are incredible, but you have a few infrastructure problems, your roads and your public transportation system. You might want to tax real estate value too. Most Vincentians appear to live in more expensive housing than I do.I was amazed there was no sewage treatment plant in St Vincent. It’s an expensive infrastructure cost, but you are destroying your coastline waters without it. Kingstown has to have a sewage treatment plant, Villa too. Don’t be like Barbados with raw sewage on the street on the South Shore. Two kids per couple is great. Anymore is a catastrophe. Too many people in paradise is simply hell for everyone.That’s a problem you have right now, too many people, not enough land or work for them. Tourism is a fix, but it’s a temporary one, and it’s not a good one. It’s often just slavery, reinvented.
Encouragement and framework for private business in SVG is minimal, bureaucracy is stifling, finance is non-existent, there is very little joined up thinking, infrastructure such as roads is crumbling, no one knows what they are doing BUT you can more or less be left to get on with watevet you want without interference, the sun shines, the people are great, countryside is wonderful, the beers pretty good….
I am so honoured and delighted that the internet trolls employed by the ULP have taken the time to write against me in comments to this article. It certainly shows how desperate they are to divert attention tfrom Gonsalves biggest failure: The Economy! Of course there is NO substance to what they write and anyone that looks at the state of the SVG economy knows that I am right and they are wrong.
I belong to no party and there are things that I do like about Ralph Gonsalves but unfortunately I agree with the vast majority of intelligent Vincentians that say Gonsalves economics are going the wrong way. Mitchell was only somewhat better but he was in office when times were better. To have a strong economy these days you have to be intelligent in economics. Ralph has proven over and over again that he is not “the one” He lacks the courage to change direction. Godwin Friday is extremely impressive in economic intelligence!
Hey Lionheart, I’m sure there are all sorts of frustrations with anemic growth but you can look at the statistics to see the root of the problem. Back in 2007/2008, SVG was exporting 20,000,000 kg of bananas annually to the EU where they received preferential treatment. After the change of special treatment to Caribbean bananas, SVG exported only 2,000,000 kg after that policy decision. That is a 90% drop in the largest exported agricultural product out of SVG. Couple that will the fall in remittances after the global recession. SVG received 22% of it’s household income via remittances prior to 2009, which dropped more than 50%, if I remember correctly, during the global recession. Recessions means less visitors and those who visit will spend less because of fear back home. If anyone thinks these major economic shocks could and should bypass SVG, then we aren’t being realistic. Remember the IMF estimates 1% GDP growth off the opening of ONE hotel, which is amazing to me. So these shocks were/are stifling. So, no government have the luxury of standing pat after these major shocks and must act to build the only other industry available to the Caribbean which is tourism. If anymore tells you they can achieve 7-8% growth without tourism in the Caribbean, have them show you their plan. These things don’t happen magically, we both would label that voodoo economics.
Politics certainly gets ugly at the local level, but the luxury of not living in SVG year round is that you avoid the everyday politics of the parties and just root for the Country to succeed. So if anyone has a plan to improve the economy outside of tourism, present it. If it smells good then I’ll root for them too.
Lostpet, Friday is no economist, because his figures of growth for developing countries is wrong
2. 3-4 % growth for countries such as US and UK has not been achieved since the global recession
3. No small island in the Caribbean will ever achieved a growth of 7-8%
4. A growth of 2-2.1% is an achievement for small countries, 4% is a bonus
Gentlemen stop parading these opposition politicians, they do not have the grits to lead nor rule. They do not conduct proper research before their presentation, they continue to use hypothesis.
The evidence is clear of how they will run this country whenever they get in power.
Just remember; they went into power 1984 as poor men, but by the end of their era, they all came out as multi millionaires.
Dont make the same mistakes twice
William, I disagree. Notice that there are good economists and bad ones. Paul Krugman is put in front of us and we are told he is great, even though he is always wrong. Peter Schiff and others are right 90% of the time and we are told they are bad. The most economically successful countries in history did not always have economists playing a big roll. Ivan O’Neal played a major roll in making Singapore become the wealthiest nation on earth and in SVG we laugh at him. It is far easier to have a 7% growth rate in a small country than a big one. It has to be done in a certain way. But a 7% growth rate is not always sustainable anywhere especially in a small country. It is VERY EASY to have a 7% growth rate in SVG for a short term. Look at the state of our economy now and that should be abundantly obvious.However a 7% Growth rate can be very dangerous. Nevertheless these numbers are not as important as you think. Friday probably does not have all the answers but he is a genius compared to Ralph. There is so much you need to learn about economics. I suggest you research history and you will find that the elements Ralph uses has always failed no matte what, and the elements Friday proposes have always worked used in conjunction with other variables that influence economics, such as correcting a bad work ethic, financial laws and accountable records and financial management, interest rates, currency, etc.., Sadly, in spite of some of his few great abilities Ralph really is hopeless in economics, the lifeblood of a nation, and although he knows this he does not have the courage nor fortitude to change direction.
So all the NDP came out wealthy? What about Ralph, What about Julian? […] If I say that Ralph’s economics is bad it does not mean Mitchell’s economics was good, or did I say that? The name of the party means nothing it is who leads it in SVG that matters. Do you think the Labour Party has anything to do with labour and jobs?
Lostpet , Dr Gonsalves economics are bad, yet the NIS has seen tremendous growth under his leadership. In 2000, (1,726) active employers existed, in 2017, there were (2,095) active employers. Bad economics. NIS total assets EC $509.6 million compared to EC $218.7 million in 2000. Very bad economics. Investment in 2000, were EC $209.2 million, while in 2017, they had increased to EC $453.4 million. Terrible economics. Local banking sector stable, another bad economics. It seems like Dr Friday missed out on these stats. Check the IMF report, 2017.
Observer, What you say is mostly true but there is much more to it than that. We all know that Gonsalves uses the NIS as a piggy bank. Retirement funds are supposed to loan money out to AAA -rated investments. The SGV government is rated as one of the worst investments on earth. The government forced the NIS to loan it money.
Loaned out money is not an asset, otherwise Venezuela, (yes, the Petrocarib place)(with the richest resources ON EARTH) would be the wealthiest nation. Ask those people on the streets if they feel as if they are the wealthiest nation on earth. There is much more to economics than statistics because anyone can manipulate them to their favour.