IMF signals good management of SVGs economy, predicts 2-year growth

By Admin. Updated 6:00 a.m., Tuesday, September 6, 2022, Atlantic Standard Time (GMT-4).

Construction on the Holiday Inn Express at Diamond.

The Washington-based International Monetary Fund – IMF, has signaled, in its Staff Concluding Statement of the 2022 Article IV Mission, that this country’s economy is being managed well.

The IMF said the economic outlook for Saint Vincent and the Grenadines – SVG, is “favourable,” but cautioned that it is “subject to large downside risks.”

The international financial institution which has a membership of 190 countries said: “The post-eruption rebuilding activity, continued recovery in tourism and agriculture, and the start of several large-scale investment projects would support real GDP growth of 5 percent this year.”

It said: “Growth is projected to strengthen to 6 percent in 2023 as major projects get into full swing.”

The IMF said: “The fiscal stance embedded in the 2022 budget strikes a balance between the need to support the vulnerable, building resilience, and maintaining fiscal prudence.”

The institution also remarked favourably on the government’s spending.

On spending, the IMF said: “The authorities have rightly prioritized spending to provide essential support to reconstruction and economic activity and plan to keep the fiscal relief to cushion the impact of rising living costs temporary.”

“Additionally, the government rolled out temporary income support and other targeted programs to support households heavily affected by the volcanic eruptions. This should be accompanied by further efforts to enhance coverage and targeting of social safety nets, including through ongoing efforts to digitize beneficiary information and payment system,” the IMF added.

The IMF also commended SVG government’s tax administration and debt management efforts.

On tax administration, the IMF said: “The authorities’ strong efforts to strengthen tax administration have been instrumental in sustaining revenue collections and should continue, including by implementing e-Tax and unique ID, strengthening fuel import control, fully implementing the enacted Tax Administration and Procedure Act, and modernizing customs legislation. The recent establishment of the Fiscal Responsibility Mechanism (FRM) is a step in the right direction.”

On debt management, the IMF said: “The mission welcomes the authorities’ continued commitment to reaching the regional debt ceiling and the medium-term fiscal strategy set out in the 2021 RCF.”

“The public debt is projected to peak in 2024 and steadily decline thereafter to fall below 60 percent of GDP before the regional target date of 2035. Given the elevated macroeconomic uncertainty and high vulnerability to external shocks and natural disasters, the debt trajectory is, however, subject to significant risks,” the institution added.

The IMF, however, gave unfavorable statements regarding inflation.

The IMF said: “Higher import prices, in particular those for fuel and food, are projected to push inflation to 5.7 percent in 2022. Nevertheless, core inflation is estimated to have remained below 2 percent, reflecting the still negative output gap. Risks to the outlook are tilted to the downside, including from commodity price volatility as a result of a further escalation of the war in Ukraine or supply chain disruptions, sharper-than-expected slowdown in trading partners’ growth, Covid-19 outbreaks, potential delays in investment projects including due to supply chain disruptions , and ever-present threat of natural disasters. On the upside, a faster-than-projected recovery in tourism could improve growth.”

Read the rest of the IMF’s Staff Concluding Statement of the 2022 Article IV Mission here.

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