News from the International Monetary Fund (IMF) that St. Lucia is poised for growth but needs to keep its debt in check, has been met with skepticism from United Workers Party (UWP) Leader Allen Chastanet.
He said the report, as it pertains to 2015, remains a “projection” until the first estimate of a social and economic review for the year in question is completed.
According to the IMF, the St. Lucian economy is recovering and the short-term growth outlook is positive the government still needs to reduce the high public debt and improve competitiveness to improve medium-term growth prospects and reduce high unemployment, according to a report on Caribbean360.
That assessment was contained in the report of an IMF mission, led by Leo Bonato, that left the island last Friday after conducting Article IV consultations, Caribbean360 reported.
“On the back of strong tourism inflows and lower oil prices, the St. Lucian economy has returned to growth after experiencing a recession in 2012 and close-to-zero growth in 2013. GDP growth reached 0.5 percent in 2014 and is expected to accelerate to 1.6 per cent in 2015, driven by tourism and transportation services,” it said.
However, the UWP leader said if the 1.6 percent growth is based on the “premise that tourism and transportation are carrying the economy”, then the outlook is bleak due to an expected downturn in the tourism industry.
“When one looks on the tourism arrivals number, that I have up until 2015, shows that tourism arrivals increased only by 3.2 percent. That number is expected to decline before December,” Chastanet said.
And his reasoning: two major hotels – Smugglers Cove and Cotton Bay which account for about 450 rooms combined – have closed.
He said Smugglers Cove – recently purchased by another company and is undergoing a major overhaul – accounted for a large number of visitors from the United Kingdom and Canadian tourism markets.
“UK and Canadian arrivals have been declining significantly… That decline is also being precipitated by the value of their currency,” Chastanet pointed out.
He said last year at this time, the Canadian dollar was almost one to one US, and now it is 0.73, which means “hoteliers have to discount heavily or make up for that devaluation loss”.
The former tourism minister said the projections in tourism are destined to continue to decline. “One, we have less rooms avalable and two, the currency is impacting on the revenues we are getting from those two marekets.”
He pointed out that while stay-overs have increased by 3.2 percent, “bed nights” are down by two percent so far this year.
“The expenditure on tourism is flat or heading for a decline,” he noted.
Chastanet went on to say that the SLP government is misleading the public by highlighting the inflating GDP.
He said the GDP is based on current market prices versus constant market prices, and the difference between the two is the impact of inflation. “The fact remains that the economy has experienced negative growth in the last three years and in our opinion will experience the same thing this year.”
Chastanet pointed out that in 2011, St. Lucia was paying $100 million a year in interest payments, and is now projected to pay $165 million in 2015 and $195 million in 2016.
“In five years, the government would’ve doubled the amount of interest payments.”
He said commercial banks have been enduring severe credit risk due to the hardship faced by homeowners and businesses, and non-performing loans remain at an all-time high.
And in spite of the “so-called job-creation” initiatives by the SLP government, unemployment is at its highest in recent history, Chastanet said.
“We want to emphasise that government-hiring is not job creation and the paychecks for these workers are supported by borrowed funds,” he said, adding that government is lacking at creating “real and sustainable jobs for our young people”.