Caribbean & Central America - September 2015 (ISSN 1741-4458)

*** IMF POINTS TO STRONG OUTLOOK FOR ST KITTS & NEVIS. Reporting on 3 September, the International Monetary Fund (IMF) said of the St Kitts economy: “The near-term outlook remains strong, but there are risks on the horizon.”

The current strength of the St Kitts & Nevis economy is based on a strong recovery in tourism which “fuelled rapid GDP growth of about 6% in 2013 and 2014”, according to the Fund. One welcome consequence of this rapid growth has been a decline in debt to 79% of GDP at end-2014 from 100.8% at end-2013.

More cautiously, the IMF says that over the medium term growth will “converge to the regional average of about 2.5%”, and it points to a number of worries. These include competition for the lucrative citizenship by investment (CBI) programme from nearby countries and globally, and the widening of VAT and customs exemptions – “which may undermine fiscal and debt sustainability over the medium term”. Another potential threat to debt sustainability would be a reversal of the debt-land swap programme.

In its concluding remarks, the IMF said that faster progress was required on structural reform to enhance competitiveness. According to the Fund, “priorities include strengthening support to the tourism sector, improving the business climate, and diversifying into alternative energy sources”.

*** DEVASTATION FOR DOMINICA. In an address to the nation on 28 August, following the passage of Tropical Storm Erika, Prime Minister Roosevelt Skerrit warned that the devastation caused by the storm “may have set our development process back by 20 years”.

Roosevelt said: “The extent of the devastation is monumental. It is far worse than expected…Many communities…have been swamped and are still cut off from the rest of Dominica…nearly every community has been hit. There is extensive damage across our small island after floods swamped villages, destroyed homes, and wiped out roads. Some communities are no longer recognizable.” Twenty people were killed by the storm. The cost of rebuilding the island’s infrastructure has been estimated over US$230m, which is about half the island’s GDP.

*** DOWNGRADE FOR THE BAHAMAS. In late August, Standard & Poor’s credit rating agency downgraded The Bahamas’ foreign and local currency sovereign rating from BBB/A-2 to BBB-/A-3 and attached a negative outlook to the economy. A key problem is the Chapter 11 filing for the vast as-yet-unfinished Baha Mar tourist resort development. The earliest that the resort is now thought likely to open is during the first half of 2016, provided the legal wrangling can be resolved.

A week after S&P’s move, Moody’s Investors Service issued a warning along with a reduction in its forecast for Bahamas GDP growth in 2015 from 2.2% to 1.7%. It is estimating growth for next year of 1.5%-2.0%.

*** JAMAICA'S OPPOSITION KEEPS ITS LEADER. There had been speculation that the opposition Jamaica Labour Party (JLP) would drop its leader Andrew Holness, but his leadership was confirmed at a parliamentary caucus on 11 August. He will now lead the party into the general election that is due by December 2016 but which some observers believe Prime Minister Portia Simpson Miller could even call before the end of this year. After the meeting, JLP officials denied that there had ever been any support among the party’s 21 members of parliament for a change in leadership.