KINGSTOWN, St Vincent and the Grenadines, Thursday November 22, 2018 – The economy of St Vincent and the Grenadines is making a full turnaround boosted by increased tourism arrivals according to the International Monetary Fund (IMF).
In a statement issued on November 21 after the conclusion of their most recent Article IV consultation visit to the Eastern Caribbean state, the IMF said the closure of Buccament Bay Resort (the largest hotel on the main island), and heavy rains with flooding and landslides, slowed down growth in the second half of 2016 and early 2017.
However, following the opening of the new Argyle International airport, tourist arrivals have recovered, boosting tourism-related services (such as hotels, restaurants, and retail), stated the Washington-based agency.
The IMF projected that real gross domestic product (GDP) growth would rebound from 0.7 percent in 2017 to 2 percent in 2018, and further to 2.3 percent in 2019, driven by increases in tourist arrivals, tourism-related activities (including investment in hotels and resorts), and related local production. Beyond 2020, growth would be sustained at around 2.3 percent, assuming steady tourism and investment growth, added the staff report.
The recovery efforts in hard-hit neigbouring Dominica after being struck by Hurricane Maria in September 2017 increased demand for reconstruction materials, which also helped St Vincent and the Grenadines recovery, stated the IMF. As a result, quarterly data show that output growth (year-on-year) has turned positive since the third quarter of 2017.
However, the IMF flagged that St. Vincent and the Grenadines continues to face challenges in sustaining the growth momentum over the longer-term.
“Like other Caribbean economies, its high exposure to natural disasters, a narrow production and exports base, and limited physical and human capital constrain potential growth,” stated the IMF, adding that the staff visit focused on policies to achieve stronger and sustainable growth, build fiscal buffers, bolster resilience to natural disasters, and ensure financial stability.
Among the key recommendations made by the IMF were for the government to advance the structural reforms that remained key to capitalising on the growth opportunities created by the almost two-year old airport.
“Its economic benefit is already visible with the increased number of tourists. For its benefits to reach broader economic sectors beyond tourism, the authorities need to make further efforts to foster private sector activity, by improving the investment environment and strengthening physical and human capital,” reported the IMF staff.
The IMF also called on the Ralph Gonsalves-led administration to enhance transparency, reduce red tape, and attract investors.
“Tax incentives should be streamlined, discretional tax concessions minimized, and an investment law established. Invest SVG (the government’s investment promotion agency) should be revamped as a one-stop-shop,” stated the IMF staff report.
The IMF also recommended that efforts continue to improve infrastructure, particularly irrigation, roads, and ports, that are resilient to natural disasters, through developing a long-term infrastructure plan.
The IMF also called on St Vincent and the Grenadines to increase its human capital investment, noting that government’s focus on improving education is welcome, but more efforts were needed to reduce labor skill mismatches and very high unemployment levels.