Caribbean & Central America - October 2018

*** IMF RUNS SLIDE RULE OVER DOMINICA. The International Monetary Fund (IMF) has just completed its latest Article IV Consultation with Dominica, the first since Hurricane Maria hit the island in September 2017, compounding the damage from tropical storm Erika. The estimated damage from Maria was US$1.3bn, the equivalent of 226% of GDP.

According to the IMF, output in 2018 is expected to be down by 14%, and it could take five years for output to recover to pre-hurricane levels. The fall in output, and hence government revenue, along with the increased costs of reconstruction, will (says the IMF) “lead to a substantial worsening of fiscal and external deficits”.

The fall in tax revenue after the hurricane (down 23%) and increase in expenditure (up 18%) were partially offset by a surge in grants and buoyant Citizenship by Investment (CBI) revenues. Nevertheless, excluding CBI revenue, the FY2016/17 deficit was 17.7% of GDP. As a consequence, public debt is expected to rise near 90% of GDP, up from 71.7% in 2016. The fiscal deficit is expected to peak at 8.4% of GDP in 2020 and to improve gradually thereafter.

*** BELIZE RECOVERY STRENGTHENING. According to the IMF, Belize’s economic recovery is strengthening. GDP grew by 1.4% in 2017, but by the second quarter of 2018 it had accelerated to 5.4% and is on target for a 2.2% advance for this year in total. Tourism arrivals were up 17.1% in January-June 2018 compared with the same period in 2017.

The other good news is that the country recorded a primary fiscal balance of 1.3% of GDP in FY2017/18, implying a 3.2% of GDP turnaround from the FY2016/17 level. For 2018/19, the budget is targeting a primary surplus of 2% of GDP.

However, the IMF warns that there are still risks. It says: “A fiscal stance that is stronger than projected in the baseline scenario, which assumes no fiscal adjustment beyond FY2018/19, would be needed to reduce public debt from its end-2017 level [of 94% of GDP] to prudent levels over the medium to long term…”

*** GUYANA GOVERNMENT TARGETS INDIGENOUS COMMUNITY. Guyana’s Amerindian community makes up just over 10% of the population, in a society divided more or less evenly between Guyanese of East Indian origins and Guyanese of African origins and this is an important segment of the electorate for the main political parties. The incumbent government has an advantage in that it can channel government spending towards the Amerindian community, but often this is a last-minute play as elections loom. President David Granger seems determined to court the Amerindians well ahead of the 2020 election, and in August he launched a five-year development programme with the main goals of: improving quality of life, promoting inclusion, reducing the cost of living, reducing dependency, fostering self-sufficient development, preservation of cultural identity, ensuring access to education, and closing the gap between the coastal and hinterland conditions for the Amerindian communities.

The Amerindian vote in 2020 could well prove to be decisive. In 2015, the-then incumbent People’s Progressive Party/Civic (PPP/C) won a healthy majority in the four interior regions of 16,899 to 12,816. The ruling coalition, led by Granger’s People’s National Congress Reform (PNCR) party, is hoping to flip this in 2020.