Post on 15-Jan-2016
GOVERNMENT OF SAINT LUCIAGOVERNMENT OF SAINT LUCIA
Ministry of Finance, Economic Affairs, Planning & Social Ministry of Finance, Economic Affairs, Planning & Social SecuritySecurity
Economic Performance and Prospects
Recent Economic Performance
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Growth Performance
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Average growth of 2.5% over the last decade.GDP contracted by 0.6 percent in 2012 due to low external
demand…
Real Sector Review
Baseline: Real Growth Rates (%)
2011 2012 Pre.
Real GDP 1.0 -0.6
Agriculture -6.5 10.5
Of which: Bananas -37.6 45.3
Hotels -0.4 -1.5
Manufacturing 2.5 -4.7
Construction 2.1 -4.5
Distributive Trades 5.6 -5.4
Banking & Insurance -0.2 -1.0
Real Estate, renting &Business activities 1.0 2.1
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Trend In FDI
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Commercial Bank Credit
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Fiscal Performance
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The fiscal position has deteriorated… Widening fiscal deficit, corrective measures required…
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Fiscal Summary
2009/10 2010/11 2011/12 2012/13Total Rev. & Grants 826.8 874.5 926.7 808.4
% Change 5.8 6.0 -12.8
Current Revenue 759.6 787.8 839.5 784.9% Change 3.7 6.6 -6.5
Current Expenditure 683.8 742.7 776.7 831.8% Change 8.6 4.6 7.1
Capital Expenditure 241.3 298.6 369.3 356.4% Change 23.7 23.7 -3.5
Total Expenditure 925.1 1,041.3 1,146.0 1,157.0% Change 12.6 10.1 1.0
In EC Millions
Current Revenue
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Fall in current revenue due to reduce intake of taxes on income and international trade
Current Revenue
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Fall in taxes on income driven by fall in corporate taxes…
Current Revenue
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Fall in international trade led by fall in excise tax (petroleum)…
VAT Performance
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Current Expenditure
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Increases in current expenditure driven by higher interest payments, goods and services and transfers…
Composition of Budget 2012/13
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By Category of Recurrent Expenditure
DEBT
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Debts levels are trending upwards…
Inflation
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Inflation uptick due to VAT but temporary…
4.3
3.22.8
2.5 2.3
3.0 3.0 3.0
1.51.5
1.5 1.3
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2010Q
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2010Q
2
2010Q
3
2010Q
4
2011Q
1
2011Q
2
2011Q
3
2011Q
4
2012Q
1
2012Q
2
2012Q
3
2012Q
4
2013Q
1
2013Q
2
2013Q
3
2013Q
4
2014Q
1
2014Q
2
2014Q
3
2014Q
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Headline inflation (no VAT) VAT component
St. Lucia: CPI inflation(in percent, year-on-year)
3.8%
2.9%
Projection
Source: IMF Staff Report
Unemployment
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Unemployment climbing due to slow economic activity and structural problems in the labour market.
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Challenges in curbing unemployment…Young demographic imply large inflows into the labour
marketMost of the unemployed are unemployable…
According to the latest Labour Market Needs Assessment (LMNA) for Saint Lucia 60% of job seekers have educations levels below secondary school.
Where we are Vs Where we should be…
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Indicators (2012 pre)(%)
Targets(%)
Growth Rates -0.6 3-5
Unemployment 20.7 ≤15
Inflation 4.2 2-3
Debt/GDP 80.2 60
Overall Deficit/GDP -12.9 3-5
Economic Performance and Targets (In Percent)
Turning Point
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To bridge the gap government policy should aim to achieve the following:Boosting GDP Growth
Removing structural impediments to growthImprove targeting of capital spending
Maintaining Fiscal Sustainability Reduce overall deficit through fiscal consolidation Redirect debt on a more sustainable path
Growth is Key…
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Growth
Jobs
Lower unemployment
Reduce poverty
Higher Living
Standards
Economic Development
Improve Debt Ratios
Growth leads to higher incomes…
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Impact of Growth on GDP (nominal) per Capita
Country Avg. GDP Growth (%)(2000-2011)
GDP/Capita $US (2000)
GDP/ Capita $US (2011)
China 10.2 946 5, 417
Brazil 3.7 3,762 12,789
Singapore 5.9 22,791 50,714
Taiwan 4.2 14,641 21,592
Mauritius 4.2 3,992 8,511
St. Lucia 2.5 4,622 7,379
GDP per capita In $US
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Countries GDP per Capita ($US)
(2011 Est.)
Bahamas 22,354
Trinidad and Tobago 17,060
Barbados 15,554
Antigua 12,760
St. Kitts 12,728
St. Lucia 7,379
We have some catching up to do…
Challenges to Growth
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Rapid wage growth coupled with low productivity growth has eroded competitiveness.
0
50
100
150
200
250
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
ULC (labor cost per unit of output)Average productivity (real output per employee)Average real wage
Average Wages and Productivity(Indices, 1994=100, weighted by industry's share in total employment)
Source: IMF staff estimates
How do we boost Growth ?
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Creating an Environment to Facilitate Growth
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Export Expansion
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Fiscal Sustainability
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Curbing Current Expenditure…
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Review of generalized subsidies
(food, fuel)
Curbing Current Expenditure
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Review of generalized subsidies (food, fuel)Scope for reducing generalized bulk food subsidies LPG subsidy not to exceed $15 per 20lb cylinder
Containing the wage bill
Setting WASCO on a sound financial footing to reduce expenditure on transfers
Increase water tariffs to cover operating costs
Reform of the Public Pension System
Capital Expenditure
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In the wake of global recession, the focus of government spending has been to;Generate economic activity through fiscal
stimulusReduce high unemployment rate
However the current environment requires consolidation and streamlining of the capital budget. Currently 37% of capital budget is spent on
maintenanceCapital investment to focus not only on
physical capital but on building human capital.
This will be Challenging…
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The experience of other countries demonstrate that structural adjustment and reforms are not easy to implement.
Not many examples of countries seamlessly undertaking required adjustments prior to a crisis.
The reality is that there will always be resistance to change.
Challenges…
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Fiscal adjustment will be difficult due to the current composition of government expenditure.Large percentage of recurrent expenditure is
distributed to education, health and security (teachers, nurses and policemen).
VAT and wage negotiations will impact current expenditure
78 percent of capital budget is ongoing projects. Scope for reductions is limited.
Public sector reforms will involve revisiting the current legislative framework
Re-examining the expectations of the state
Going Forward…
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Role of the Private sectorAggressively seek new investment
opportunities including partnership with foreign investors
Embrace competition and drive efficiency through adaptation of available technology
Introduce and reach for standards in support of world class product and service delivery
Play a strong, constructive and focused role in shaping government policy
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