Annual Economic and Financial Review -December 2018

2018 Annual Economic and Financial Review ST VINCENT AND THE GRENADINES

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Eastern Caribbean Central Bank

property ($8.8m) and the issuance of aliens-

landholding licenses ($5.1m) contributed to

the marked contraction of $13.3m in the

inflows from taxes on property. Collections

from taxes on income and profits, which

accounted for approximately a quarter of

current revenue, fell by $3.3m partly due to

lower inflows from personal income and

corporate taxes, driven by fiscal incentives

announced in the 2018 budget.

Despite a

marked increase in import duty, fewer imports

of used vehicles resulted in a sharp falloff in

the vehicle surtax and contributed to the

$1.5m decline in receipts from taxes on

international trade.

Current expenditure rose by 1.7 per cent

($9.9m) to $573.5m (26.1 per cent of GDP),

reflecting higher outlays in three of the major

expenditure categories. Compensation of

employees, which comprised approximately

half of current expenditure, advanced by

2.5 per cent ($7.2m), due mainly to the

recruitment of police officers, the

regularisation of teachers and annual

increments granted to public workers.

Spending on transfers and other social

benefits, the second largest expenditure

Some of the incentives announced in the 2018 budget were 1) a reduction in the rate of tax paid on corporate

income from 32.5 per cent to 30.0 per cent and; 2) a reduction in the marginal rate of personal income tax from 32.5

per cent to 30 per cent.

component, grew by 4.9 per cent ($6.8m) due

to investments in tourism marketing,

negotiations with airlines and the operations of

the Argyle International Airport. A

0.3 per cent ($0.2m) uptick in interest

payments was recorded for the year,

attributable to an increase of 1.3 per cent in

domestic obligations, and was partly mitigated

by a 0.3 per cent contraction in external

obligations. Offsetting those expansions, was

a notable decline of 5.7 per cent ($4.2m) in

expenditure on goods and services and a

0.4 per cent ($0.1m) fall in the sundry

expenditure category (Other expenses). The

lower outlay in goods and services was related

to government’s efforts at reducing operating

expenses and maintenance services.

Investment in the government’s capital

programme contracted by 29.6 per cent

($20.3m) to $68.4m, the fourth consecutive

year of contraction. The consecutive declines

were consistent with the low rates of

implementation related to large infrastructure

projects, which has been due in part to lengthy

procurement and payment processes by some

donor agencies. The capital programme was

partially funded by capital revenue and grants