Two Years Later, Tropical Storm Erika Is Still Holding Back Dominica’s Economy

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ROSEAU, Dominica, Thursday March 23, 2017 – The devastating impact of Tropical Storm Erika in 2015 has held back the Dominican economy from expanding, the International Monetary Fund (IMF) has reported.

At the end of a two-week visit to the island, head of delegation Alejandro Guerson reported that since the storm in August 2015, government efforts continued to focus on infrastructure rehabilitation and social relief, and significant effort and resources were allocated to the reconstruction of public infrastructure and support to the affected population.

He added that economic activity was depressed last year, largely due to unfavourable weather conditions.

“Economic activity in 2016 remained weak as capacity constraints and unfavourable weather conditions slowed public investment more than anticipated,” Guerson said.

Growth is however projected to accelerate to above three per cent in 2017-18 on the back of a pickup in public investment and several large-scale projects. The experts predicted that this would stabilize at a potential rate of 1.5 per cent over the medium term.

The IMF official, who held talks with Prime Minister Roosevelt Skerrit as well as representatives from the private and public sectors and labour, said that despite high Citizenship By Investment (CBI) revenues, the fiscal outlook has deteriorated largely due to lower projected grant revenues; a downward revision in the projected yields of the fiscal consolidation measures; the increase in social transfers; and the reduction of the corporate income tax rate in January 2017.

It noted that authorities would have to use government deposits to cover financing needs to reach the regional debt target of 60 per cent of gross domestic product (GDP) by 2030 without increasing the fiscal consolidation effort above the commitments in the RCF disbursement.

Guerson stressed that Roosevelt Skerrit administration should focus on the implementation of a fiscal consolidation package, outlining critical areas of focus.

“Fiscal consolidation should focus on reducing the underlying primary balance, that is, the primary balance excluding unpredictable revenues, such as CBI flows, and transitory factors,” the IMF official said.

Guerson said the government should also limit the increase in the wage bill and prepare specific plans for the gradual unwinding of the expenditures related to recovery and reconstruction in the aftermath of Erika.

He further advised that Government should boost its tax administration to generate more revenue while holding off a wage increase for public servants and formulate clear plans to guide the spending of expenditure on ongoing recovery efforts.

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