Basseterre, St. Kitts, March 31, 2023 (SKNIS): In its latest report on the economic health of St. Kitts and Nevis, the International Monetary Fund (IMF) said that the Federation’s economy continues to rebound despite global hiccups post-Covid-19.
“St. Kitts and Nevis’ economic growth rebounded strongly in 2022 despite global headwinds. GDP is estimated to have grown by 9 percent in 2022 after contracting 14.5 percent in 2020 and 0.9 percent in 2021,” the Executive Board of the IMF reported after concluding the Article IV consultation with St. Kitts and Nevis on March 15, 2023.
The report said that the lifting of the COVID-19 restrictions played a significant role in boosting a lagging economy.
“The lifting of all COVID-related travel restrictions in August 2022 sparked a strong rebound in the tourism sector and across the economy. The authorities’ proactive policy response, facilitated by the fiscal buffers accumulated from a decade of prudent fiscal policy, helped shelter domestic prices from high global energy and food prices,” the multi-lateral agency said.
“These measures nonetheless took a heavy toll on fiscal accounts in 2022. The primary balance ex-CBI revenue and land buybacks, an indicator of the underlying fiscal stance, deteriorated to a deficit of 17 percent of GDP (vs. 15 percent in 2021). Large CBI inflows in 2022 helped finance this expansion, keeping public debt below the ECCU regional target of 60 percent of GDP,” the report concluded.
With the strong rebound in the economy, the IMF said that the country can see a return to pre-pandemic levels next year.
“Return to the pre-pandemic activity level is expected by end-2024, and beyond that, growth should converge towards its medium-term path. The budget is expected to be broadly balanced through 2025 and then go into deficits—predicated on current policies. Risks to the outlook are tilted to the downside in the short term, but with some upside potential in the medium term,” the report stated. “Downside risks primarily stem from a global slowdown, particularly in the United States, global inflation, and sustained commodity price volatility from lingering geopolitical uncertainty.”
The Report critiqued the CBI programme and hinted at economic diversification such as a transition to renewable energy.
“The growing dependence on volatile and uncertain CBI revenue is a major source of vulnerability. But prospects for an acceleration of the transition to renewable energy and increased investment in resilience by the broader public sector could represent a material upside risk,” the IMF said.
However, the Executive Board said that the government authorities are “committed to maintaining a prudent fiscal stance going forward. Small budget surpluses are planned for the next three years, supported by the phasing-out of electricity price subsidies and streamlining of income support measures. They reiterated their intention to undertake structural fiscal policy changes to reduce dependency on CBI revenues over the medium term. They also remain committed to investing in natural disaster resilience and climate change adaptation”.