St. Lucia economy improving but debt still too high – IMF

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St. Lucia economy improving but debt still too high – IMF

IMF--2-CARIBBEAN360 – The International Monetary Fund (IMF) says the St. Lucia economy is recovering and the short-term growth outlook is positive. But it has warned that the Dr. Kenny Anthony administration still needs to reduce the high public debt and improve competitiveness to improve medium-term growth prospects and reduce high unemployment.

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.

“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 IMF mission added that long-standing structural impediments weigh on economic prospects.

“The economic recovery has not yet spread to the entire economy and, according to the latest available data, the unemployment rate remains high at 25 per cent, with youth unemployment above 40 per cent. Although unemployment has increased following the global financial crisis, most of it is structural in nature and cannot be solely reduced by demand-supporting policies. Supply bottlenecks, low productivity, labour skill mismatches, and high costs limit medium-term growth prospects well below what is necessary to reduce unemployment on a durable basis.”

The team from the Washington-based institution added that high public debt remains a significant vulnerability. It currently stands at around 80 per cent of GDP – high by international standards – and the IMF noted that ever-increasing interest payments limit the budget resources available for other uses, including high-impact social and infrastructure spending.

Authorities in the Eastern Caribbean Currency Union (ECCU) member nation have therefore been advised that a sound plan to put public debt on a sustainable path should be a key priority.

“The authorities are committed to the ECCU-wide debt target of 60 per cent of GDP by 2030. Achieving this target requires a medium-term plan designed to strengthen confidence and to provide buffers for risks, including from natural disasters. In staff’s view, an adjustment of four per cent of GDP over the next four years could accomplish these objectives,” the IMF said.

“With additional revenue measures already implemented over the past few years, there is greater scope for expenditure reductions. To contain the adverse growth impact of the adjustment, savings should be found in areas other than hard infrastructure and skills attainment,” it added, noting that while the wage freeze agreement negotiated with public sector unions through 2017 is useful, continued efforts to contain wages, salaries, and benefits will be needed until the sustainability of debt is assured.

The IMF said there is also scope to achieve savings on non-targeted subsidies, social expenditures in the capital budget, transfers to statutory enterprises, utilities expenses, and by streamlining tax expenditures.

The Fund also referred to the Citizenship by Investment programme which St. Lucia expects to be a significant revenue stream.

It has advised government that if it wants to make the most of the new opportunity, it must take a prudent approach.

“Appropriate governance provisions are essential and the Citizenship by Investment Act and its associated regulations contain a number of welcome aspects in this regard. Going forward, the authorities should consider ways to minimize the risks of fiscal dependence on citizenship revenues, which can be volatile and subject to sudden stops,” it said.

“The annual cap on approved citizenship applications could be a strong device for containing these risks.”

The IMF said the revenues from the programme should be used to lower public debt or to improve growth-enhancing infrastructure.

SOURCE: http://www.caribbean360.com/news/imf-says-st-lucia-economy-improving-but-debt-still-too-high

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9 COMMENTS

  1. It is said that - Insanity, by very definition is doing the same thing over and over again expecting different results.
    If you ask me this country and its people are quite "insane" because we keep voting the same incompetent, money-hungry, power-craving individuals every term.
    and its so sad to see that allot of our people are so misinformed about how complexly poisoned this state is.

    (16)(0)

  2. Very good sign but i hope the unions play their part in that economic recovery.No pay hike until we are out of the woods. The government cannot afford to sent pubic servants home and increase the unemployment situation. on the other hand the opposition is dumbfounded,nothing to make political mileage from.St .Lucia is ours we all have to play our part.

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  3. Hey, if the report stated the the economy was doing poorly, as Chas and company are saying, then UWPs would have been all over it. The report stated that the economy is doing well but noooo, They are spinning and spinning. Haven't the government always state that the debt is high but not as high as some other economies.

    This is a situation of damned if you do and damned if you don't.

    (2)(52)

  4. The average citizen is the looser in all this. Our land will be sold to pay debt. Debt which government past and present accumulated through ineffective governance, waste and corruption. It is apparent that we cannot govern ourselves efficiently, and must be advised on how to.

    (4)(1)

  5. I thought the IMF report would have told us something new since it was said that better days are here but it seems that our debt is rising and our great rainbow of hope (Citizenship by investment) may not be a hope after all if it cannot be managed in a prudent manner. IMF seems to be dishing out sound advice and when we fail to take it then there is a cry that they are destroyers of the economy. We eh know what we want.

    (17)(1)

  6. Down with the International Monetary Fraud. The Reason African countries are doing poorly, reason why Greece currently bankrupt, reason why so many small countries are suffering. Never trust the IMF. They only destroy a country's economy.

    (7)(37)

  7. ========
    “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.
    ========
    "... Driven by tourism and transportation services,”? Transportation services? Or, is it more accurately, "a reduction in the cost of transportation services?

    The quoted part of the report requires greater explanation. First of all, I am subject to correction here. I do not have the stats right before me. There is a need for, reliable basis, a sectoral breakdown of the contributions of the key sectors that contribute to our GDP figure. That would help.

    However, I am not aware that Saint Lucia has an identifiable transportation services sector of such great note, that it generates a net quantifiable economic surplus on its own, such as to reliably augment the national GDP figure. But I am musing out loud. Aircraft landing fees (LIAT notoriously is undependable regarding payment), yachts in the Marina, and cruise ship payments?

    It is November 1015, and we must target for a 60% rate of debt to GDP for by the year 2030. So, we have, if the SLP is re-elected on this this current economic trajectory, 15 more years to enjoy its "Better days".

    In the meantime, we still have, according to the report, an estimated national unemployment rate standing at 25%, and national youth unemployment at 40%. Does anyone within the SLP or UWP have ever made a statement that they have even an inkling about what is required? Or, does anyone in these two groups have the heft to devise an effective economic restructuring plan to achieve that IMF debt target? Or is it that we have to hope for the magic of Chastanet's "air lift" and Kenny's FDI to achieve this? I wouldn't hold my breath.?

    (43)(0)

  8. Everything in this report is a condemnation of the SLP Administration.

    It effectively says that the slight increase in GDP comes from the excellent work of the tourism sector and the fallin oil prices. I say tourism not Tourist Board who are just bystanders.

    In everything else it is an indicment on the SLP and Kenny Anthony.
    Still unbelievable high unemployment which is actually 28% but for the false NICE so called jobs.
    Still a abysmal quality of life.
    Still excess borrowing at unsustainable levels and close to $100 million annually in interest payments on debt incurred by the SLP.
    Still massive borrowing to create false government 'jobs' that non self sustaining and for party hacks.
    Still complete inefficiencies in the government sector with for example no nexus between education and the private sector and job creation.

    All this report says is that Kenny is borrowing and borrowing to cover for the fact he cannot manage the economy or improve the quality of life.
    Add in the internal security problems , the dormant manufacturing sector, the backward agricultural sector with the most productive soil on Earth and you see pure failure being outlined in this report.

    The only people getting fat and plump with the Miami accounts are the SLP bigwigs.

    (16)(10)

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