St Vincent and the Grenadines economic recovery underway, slowly - IMF
WASHINGTON DC, United States, Tuesday November 6, 2012 – The International Monetary Fund (IMF) says economic activity suggests that slow recovery may be underway in St. Vincent and the Grenadines which reported a less than one per cent increase in economic growth last year.
An IMF delegation recently ended a visit to Kingstown, and according to the delegation’s leader, Nita Thacker, the local economy is expected to grow at a rate below one per cent this year.
“Growth is expected to reach its potential level of about three per cent over the medium term. Risks to the growth outlook are on the downside, especially if the recovery in advanced economies stalls. On a positive note, the decline in commodity prices, particularly fuel, has reduced pressure on inflation and on the balance of payments,” she said.
The IMF said that the government’s fiscal position is expected to improve in 2012.
“Fiscal data for the first nine months shows that revenues were lower than projected, due to the slow recovery but also to an apparent decline in tax compliance,” Thacker said, noting however that “significant cuts to central government capital spending are projected to more than offset the lower revenues, leading to a reduction in the central government fiscal deficit”.
She said the Ralph Gonsalves administration had agreed with the IMF mission on the need to reduce current spending, strengthen tax compliance and administration, and improve the operational efficiency of the central government and state?owned enterprises.
“The resulting budgetary savings can be applied toward growth- and employment-generating capital projects and better targeted social safety nets to help the poor.
“Structural reforms should continue to aim to create a growth-friendly environment and stimulate private sector activity to ensure sustained medium-term growth and generate employment, especially for the youth.
“Achieving these goals will require vigorously implementing reforms, including easing access to credit and reducing its cost, enhancing labour skills, reducing energy costs, and improving infrastructure,” she said.
The IMF said that with regards to the financial sector, continued close monitoring and decisive action to ensure that all financial institutions meet prudential requirements will be critical to safeguarding the stability of this sector.
“In this context, the mission welcomed the establishment of the Financial Services Authority which is expected to strengthen non-bank financial sector supervision,” Thacker said, adding that the mission will submit a report to the IMF executive board that will be discussed early next year. (CMC)