- Inflation is projected to rise to 6.4% in 2022
- Public debt is projected to stabilize around 90% of GDP in the medium term
- Address remaining AML/CFT deficiencies to protect correspondent banking relationships
- The natural disaster risk remains a near-term challenge and is expected to intensify with climate change
- Enhancing structural and financial resilience to natural disasters through a long-term integrated strategy 2
- Developing a strong disaster insurance strategy while structural resilience is built
By Caribbean News Global
TORONTO, Canada, (CNG Business) – Following the International Monetary Fund (IMF) mission visit to Saint Lucia from May 9 – May 23, 2022, for the annual Article IV consultation discussions on economic developments and macroeconomic policies, Saint Lucia’s economy ‘pose significant near-term risks’, noted the IMF report.
Discussions on economic developments and macroeconomic policies, said:
“ Saint Lucia now confronts a challenge from the war in Ukraine due to its dependence on food and energy imports. These setbacks compound the longstanding problems related to low growth and vulnerability to natural disasters and climate change. In addition, high public debt and large financing needs, which grew significantly during the pandemic, pose significant near-term risks.”
On September 7, 2022, the executive board of the IMF concluded the Article IV consultation stating in part; “… recovery remains incomplete, inflation is projected to rise to 6.4 percent in 2022, and public debt is projected to stabilize around 90 percent of GDP in the medium term.
CNG Business compiled the following excepts for consideration. Essential article links and comments are also available below.
“The International Monetary Fund (IMF) Article IV consultation with Saint Lucia concluded that having “been severely affected by the Covid-19 pandemic and the increase in import prices due to the war in Ukraine, collapse in 2020, tourist arrivals have rebounded significantly in 2021–22, but the recovery remains incomplete.
The public balance sheet remains under considerable strain, with a sizeable fiscal deficit and a significant increase in public debt since 2019.
The financial sector has remained stable, but nonperforming loans have risen during the pandemic.
Output is projected to gradually recover to the pre-pandemic level by 2024, slowed by the impacts of the war in Ukraine and the tightening of global financial conditions. Public and private investments are constrained by weak balance sheets, as well as higher input costs and supply constraints.
Inflation is projected to rise to 6.4 percent in 2022. The fiscal outlook is challenging due to high public debt and large refinancing needs which lead to financing constraints. Without additional policy measures, public debt is projected to stabilize around 90 percent of GDP in the medium term, limiting the space for public infrastructure and social investments.
Bank credit to the private sector is expected to remain anemic due to concerns about weak corporate balance sheets and structural impediments, such as the lack of a credit registry and a weak insolvency framework. Downside risks dominate, mainly from higher global food and energy prices, global inflation and tightening of financial conditions, supply bottlenecks, and the ongoing pandemic. The natural disaster risk remains a near-term challenge and is expected to intensify with climate change.
[Note: CNG article]
Directors noted significant challenges ahead as the public balance sheet remains under pressure, with a sizeable fiscal deficit, high rollover needs, and a sharp increase in public debt, as well as the looming threat of natural disasters.
Against this backdrop, they emphasized the need to address fiscal and financial constraints to public and private investment to foster a sustainable and inclusive recovery.
Directors concurred that, in the near-term, fiscal policy should focus on protecting the most vulnerable from food and fuel price increases.
Given financing constraints, they encouraged the authorities to prioritize spending and to increase the pass-through of global energy prices while supporting vulnerable households with targeted transfers.
As the recovery takes hold, directors called for pursuing a credible and growth-friendly fiscal consolidation to strengthen fiscal sustainability, create space for social and infrastructure investment, build buffers against natural disasters, and put debt on a downward path. Adopting a medium-term fiscal responsibility framework, a debt management strategy, and a fiscal rule to support debt sustainability would be important.
Directors urged the authorities to address remaining AML/CFT deficiencies to protect correspondent banking relationships.
“Directors called for tackling structural challenges to support growth and boost productivity, including by addressing labor market skill mismatches, building energy independence, and increasing economic diversification. They encouraged enhancing structural and financial resilience to natural disasters through a long-term integrated strategy 2 in a comprehensive macroeconomic framework within debt-sustainable bounds. Investment in resilient infrastructure would support growth and enhance fiscal sustainability.
“Directors noted the importance of developing a strong disaster insurance strategy while structural resilience is built.”
[Note: CNG article]
St Lucia’s weather phenomenon: Unprecedented?
“Pointing to the weather phenomenon, now is the time for greater investments in technological research, innovations and artificial intelligence (AI). The solutions and opportunities can be directed through, S.T.E.M programme and the ‘youth economy’.”
St Lucia struggling with climate change – torrential rain and floods
“Saint Lucia is struggling with climate change adaptation, the unavailability of financing, the clumsy priority to infrastructure maintenance, the lack of attention to waterways, rivers and land use policy, etc., in the skirmish to balance ecosystems and economic development.”
Conflict, contradictions and contrarianism main-events of MoU for St Lucia’s cruise port development
“The signing of a Memorandum of Understanding (MoU) for cruise development with Global Ports Holding (GPH) and the Government of Saint Lucia (GOSL), October 25, has gathered much attention, albeit – in the wrong direction.”
Global Ports Holding engages key cruise and tourism industry stakeholders in Saint Lucia
“The partnership between the government of Saint Lucia and GPH – the world’s largest independent cruise port operator – includes a 30-year concession agreement for cruise-related operations at Castries and Soufriere Bay.
“Under the agreement, GPH will upgrade Berth 1 at Pointe Seraphine to accommodate Oasis-class ships – the largest cruise ships in service – which will assist in increasing cruise passenger volume to Saint Lucia from its annual peak of 790,000 passengers to over one million per year,” GPH press release November 16, 2022.