Anguilla: Country Economic Forecast: 11 Aug 2011

The tourism downturn that caused a sharp GDP contraction in 2009-10 was driven by the fall in demand after the 2008 global crisis and by capacity problems arising from project delays. Recovery in upmarket tourism has now returned the economy to growth, but the industry's long-term expansion depends on improving international air and sea connections as well as adding facilities to increase tourist spending. The financial sector is recovering from global downturn and last year's collapse of two regional insurers; registration of new captive insurance companies picked up strongly late last year. A new International Insurance Act will more clearly distinguish foreign from domestic business, as required by ECCU rules. Planned tax reforms aim to boost private enterprise by simplifying collection. The IMF, invited by the new government for a 10-day visit in July, has endorsed budget re-balancing efforts but admitted that low capital spending subdues the growth outlook. It anticipates a fiscal surplus this year only because of a windfall tax on tourism projects; a UK audit of the 2011 budget, with projected deficit halved to XCD10.3m, points to balance by 2013 helped by new telecoms, oil and pay-roll taxes as well as spending cuts. Increased public investment will entail current spending cuts, and public-sector job losses (raised after a 3-month wait for UK budget approval) will lift already high unemployment in 2012. More positively, a US$4.3m payout was received within a month of Hurricane Earl damage in August 2010, confirming the effectiveness of the region's Catastrophe Risk Insurance Facility (CCRIF)