IMF Wraps 2024 Article IV Consultation With St. Lucia

Washington, DC: On February 7, 2025, the Executive Board of the International Monetary Fund (IMF) concluded the 2024 Article IV consultation [1] with St. Lucia and considered and endorsed the staff appraisal.

St. Lucia's tourism-dependent economy has normalized after the pandemic. GDP growth is expected at 3.7 percent in 2024, on strong tourism, construction, and manufacturing activity. Unemployment has dropped to decade lows but remains elevated at 14 percent. The authorities recently introduced a minimum wage, increased minimum pensions, and plan to implement an unemployment insurance scheme. Inflation, which peaked at 6.4 percent y/y in 2022, fell to 0.8 percent in June, driven by utilities and energy prices, as well as a VAT reduction. The current account deficit narrowed to 1.9 percent of GDP in 2023 with the rebound in tourism, even as the fiscal deficit widened to 2.6 percent of GDP and debt ticked up to 74.5 percent of GDP. Banks are liquid and profitable, but credit growth is weak, although credit unions are growing rapidly.

Over the medium term, once planned infrastructure and hotel investments approach completion, growth is projected to slow to a modest 1.5 percent over the medium term. Inflation is expected to rise to 2 percent over the medium term as global input costs normalize. The deficit excluding natural disasters costs is forecast to narrow to 1.3 percent of GDP in FY2024 but widen thereafter to 2.2 – 2.9 percent of GDP on the back of higher capital expenditures. Debt is projected to stabilize around 74 percent of GDP, well above the regional debt ceiling of 60 percent of GDP. The current account deficit is anticipated to narrow further over the medium term on account of stronger tourism and lower fuel prices. Bank credit to the private sector is projected to remain anemic because of high NPLs, the lack of foreclosure legislation, and concerns about the fiscal outlook.

Risks to the outlook are tilted to the downside and include investment delays and large debt rollover needs. St. Lucia is vulnerable to a global slowdown and supply disruptions, as well as natural disasters and climate change. On the upside, stronger-than-expected growth in tourism and construction could provide a positive boost to the economy.

Executive Board Assessment [2]

Executive Directors agreed with the thrust of the staff appraisal. They welcomed St. Lucia's strong economic performance, aided by robust tourist arrivals and a supportive fiscal stance. While noting the favorable near‑term prospects, Directors highlighted that medium‑term growth is expected to slow and risks are tilted to the downside, including from investment delays and high tourism dependence. Prudent policies and reforms should aim to reduce debt, increase productivity, and boost potential growth.

Directors recommended sustained fiscal consolidation, while safeguarding space to support capital projects and resilience against natural disasters. They called for comprehensive tax policy reform, enhanced tax administration, and improved control and targeting of current expenditures, including the wage bill. Directors welcomed the authorities' commitment to achieving the regional debt target and recommended the adoption of a sound fiscal rule. Further improving the transparency of the Citizenship‑by‑Investment Program is also important.

Directors highlighted that while systemic risks appear contained, further reforms are needed to strengthen the financial sector. They recommended steps to further reduce banks' NPLs and enact foreclosure legislation to support credit growth. Improved compliance with ECCB provisioning requirements for banks is necessary. Directors welcomed the new Co‑operative Societies Act and encouraged continued efforts to strengthen credit union regulation. They also highlighted the need to enhance risk monitoring of the insurance sector and for continued progress to address AML/CFT regulatory gaps.

Directors underscored that structural reforms and natural disaster‑resilient investment are crucial to diversify the economy and boost potential growth. They emphasized the importance of improving credit access, reducing operating and tax compliance costs, and addressing labor force skill mismatches. Noting the implications for external competitiveness, Directors urged careful calibration of the minimum wage, in close consultation with stakeholders. They also encouraged measures to enhance the natural‑disaster insurance framework and develop geothermal energy.

Table 1. St. Lucia: Selected Social and Economic Indicators, 2020–29

I. Social and Demographic Indicators

Area (sq. km)

616

Infant mortality (per thous. live births, 2023)

14.4

Human Development Index ranking (of 189 countries, 2022)

108

Population Characteristics

Total (thousands, 2023, UN)

179.3

Gross Domestic Product (2023)

Rate of growth (average 2014-2023)

0.34

(millions of US dollars)

2,430

Population density (per sq. km., 2023)

291.0

(millions of EC dollars)

6,561

Secondary education enrollment (percent, 2022)

88.1

(US$ per capita)

13,555

Life expectancy at birth (years, 2023)

72.7

II. Economic and Financial Indicators

Est.

Pro

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

Output and Prices

Real GDP (at market prices)

-24.4

11.6

20.4

2.2

3.7

2.8

2.4

1.9

1.5

1.5

Consumer prices, period average

-1.8

2.4

6.4

4.5

1.3

1.3

1.8

2.0

2.0

2.0

Unemployment rate (% annual average)

21.7

21.9

16.5

14.0

Real effective exchange rate

(annual average, depreciation -)

99.6

95.5

96.3

97.2

Central Government Finances 1/

Revenue

21.7

21.0

21.0

21.4

22.3

22.2

22.1

22.0

21.9

21.9

Tax revenue

19.0

18.0

18.0

19.0

19.6

19.5

19.4

19.3

19.2

19.2

Nontax revenue

1.6

1.8

1.9

1.8

1.9

1.9

1.9

1.9

1.9

1.9

Grants and capital revenue

1.1

1.3

1.1

0.5

0.8

0.8

0.8

0.8

0.8

0.8

Expenditure

33.2

25.8

22.7

24.0

23.6

24.4

25.0

24.9

24.5

24.1

Current primary expenditure

23.8

18.2

17.0

17.0

17.4

17.6

17.8

18.0

18.0

17.9

Interest payments

3.8

3.1

2.9

3.4

3.3

3.5

3.5

3.6

3.6

3.7

Capital expenditure

5.6

4.5

2.8

3.7

2.8

3.3

3.7

3.3

2.9

2.5

Overall balance excl. ND cost

-11.4

-4.8

-1.6

-2.6

-1.3

-2.2

-2.9

-2.9

-2.6

-2.2

Overall balance, incl. ND cost

-11.4

-4.8

-1.6

-2.6

-1.9

-2.8

-3.6

-3.5

-3.3

-2.9

Total public sector debt 2/

95.0

81.9

73.4

74.5

72.7

72.3

72.7

73.2

73.6

73.6

Domestic

49.4

39.3

35.6

31.5

30.1

29.5

29.3

29.4

29.4

29.4

External

45.5

42.6

37.8

43.1

42.6

42.9

43.3

43.8

44.2

44.2

Central government debt

89.8

76.8

68.9

69.6

68.1

67.9

68.4

69.1

69.7

69.9

Money and Credit, End of Period (Annual Percent Change)

Broad money (M2)

-6.6

14.9

3.8

11.3

2.7

4.6

4.8

4.4

4.0

4.0

Credit to private sector (nominal)

2.7

-0.1

1.6

2.7

1.6

0.6

0.8

0.4

0.0

0.0

Credit to private sector (real)

4.5

-2.5

-4.5

-1.3

0.3

-0.7

-1.0

-1.5

-1.9

-1.9

Balance of Payments

Current account balance, o/w:

-18.9

-11.9

-2.9

-1.9

-1.6

-1.3

-1.2

-1.0

-0.6

-0.5

Exports of goods and services

30.1

38.1

55.3

58.2

57.6

56.9

56.9

57.0

57.3

57.4

Imports of goods and services

-47.7

-47.8

-51.0

-52.4

-52.5

-52.4

-52.2

-52.2

-52.2

-52.1

Financial account balance

-14.3

-8.3

-1.1

-0.2

-0.8

-0.5

-0.4

-0.2

0.2

0.3

Direct investment

-8.2

-6.8

-2.2

-5.8

-5.7

-5.6

-5.5

-5.5

-5.4

-5.3

Portfolio investment

6.2

4.4

3.0

-0.7

-0.3

0.2

0.6

1.0

1.4

1.9

Other investment

-10.3

-14.2

-0.1

3.8

4.1

4.4

4.2

3.9

3.8

3.4

Net reserves assets

-2.0

8.3

-1.7

2.5

1.1

0.6

0.4

0.3

0.3

0.3

External debt (gross) 3/

79.0

70.0

63.0

68.0

67.1

66.7

66.0

65.3

64.7

63.9

Public

45.5

42.6

37.8

43.0

43.4

44.1

44.4

44.6

44.8

44.8

Memorandum Items:

Nominal GDP (EC$ millions)

4,048

5,041

6,325

6,561

6,927

7,245

7,590

7,925

8,245

8,578

Net imputed international reserves

Months of imports of goods and services

3.0

3.5

2.9

3.3

3.4

3.4

3.3

3.3

3.2

3.2

Percentage of demand liabilities

88.3

92.3

91.4

90.6

92.1

92.0

91.9

91.7

91.6

91.4

Sources: St. Lucia authorities; ECCB; UNDP HDI; and Fund staff estimates and projections.

1/ Fiscal year (April–March) basis. Fiscal balances do not include the airport project, which is implemented by a public corporation.

2/ Public sector debt includes payables and overdrafts/ECCB advances.

3/ Comprises public sector external debt, foreign liabilities of commercial banks and other private debt.

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis of discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.

/Public Release. This material from the originating organization/author(s) might be of the point-in-time nature, and edited for clarity, style and length. Mirage.News does not take institutional positions or sides, and all views, positions, and conclusions expressed herein are solely those of the author(s).View in full here.