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St Vincent & Grenadines: Country Economic Forecast: 09 Dec 2011

4 Pages Oxford Economics December 09, 2011 SKU: OFE6732569

Recession due to the global financial crisis and tourism downturn was extended into 2011 by natural disasters - three days of torrential rain in April caused major farm and infrastructure damage, compounding that from Hurricane Tomas in October 2010. As a result, GDP is estimated to have fallen 0.5% in 2011. And with a quality gap restraining banana exports, the current account deficit rose above 36% of GDP. Estimating total damage at 8-9% of GDP, the government in February lined up US$2m of emergency IMF credit, with up to US$30m to follow in development bank loans and grants. While this assistance will help reverse the fall in public investment in 2010, it is conditional on public spending cuts and tax collection gains and will not address the agricultural decline that preceded the floods. New property taxes, pension reforms and state enterprise restructuring are due to start in 2012, aimed at a primary budget surplus to stabilise debt, servicing of which already absorbed 26% of revenues in 2010. These measures will keep growth subdued in the forecast period, even with no more adverse weather. Banks' bad debt problems have worsened and, while the currency board will contain inflation, small business finance will depend on new state-backed credit schemes. Commodity trader Armajaro has been lined up to assist a major expansion of cocoa output, currently small-scale but potentially a new export crop at the high-quality end of a growing world market. Initially around 200 hectares will be switched from banana production, with plans to raise this tenfold if initial marketing efforts succeed.

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St Vincent & Grenadines: Country Economic Forecast: 09 Dec 2011

Oxford Economics
December 09, 2011

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