The Vincentian economy is ‘recovering’, the International Monetary Fund (IMF) said on Monday, adding that beyond 2020, growth would be sustained at around 2.3 per cent, assuming steady tourism and investment growth.
“The growth outlook is positive. Staff expects real GDP growth to rebound from 0.7 per cent in 2017 to 2 per cent in 2018, and further to 2.3 per cent in 2019, driven by increases in tourist arrivals, tourism-related activities (including investment in hotels and resorts), and related local production.”
The closure, since December 2016, of Buccament Bay Resort — the largest hotel in St. Vincent — and heavy rains with flooding and landslides slowed down growth in the second half of 2016 and early 2017, the IMF said.
“Following the opening of the new airport, however, tourist arrivals have recovered, boosting tourism-related services (such as hotels, restaurants, and retail),” the IMF said in a statement to mark the Feb. 15 conclusion of its Article IV consultation with St. Vincent and the Grenadines.
Increased demand for reconstruction materials from Dominica, which was struck by Hurricane Maria in September 2017, also helped the recovery.
As a result, quarterly data show that output growth (year-on-year) has turned positive since the third quarter of 2017.
Over the past year, inflation has remained around 2-3 per cent.
The IMF, however, stated that this outlook is subject to both external and domestic risks.
“External risks include weaker-than-expected global growth, tighter global financial conditions, and higher oil prices.
“Domestic risks include more severe and frequent natural disasters, the loss of correspondent banking relationships, and materialisation of financial sector risks. There is also upside potential stemming from stronger-than-expected tourist arrivals, investor interest, concessional financing for capital projects, and the successful completion of the geothermal power plant.”
The 2018 Article IV consultation focused on policies to achieve stronger and sustainable growth, build fiscal buffers, bolster resilience to natural disasters, and ensure financial stability.