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2018 Annual Economic and Financial Review ST VINCENT AND THE GRENADINES
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Eastern Caribbean Central Bank
activity would include new investments in
tourism properties, such as developments at
Glossy Bay in Canouan and at
Mt Wynne/St Peter’s Hope. These initiatives
are expected to be complemented by public
sector investment through the construction and
rehabilitation of the road network and
continued infrastructural works for the
geothermal project. However, to fully
capitalize on these benefits, the rate of
implementation for infrastructural projects
must be accelerated in 2019.
Government balances are likely to deteriorate
in light of a number of initiatives announced
in the 2019 budget. A significant increase in
expenditure is projected for 2019, associated
with higher allocations for salaries and wages
as well as greater investment in infrastructure.
Particularly, recurrent spending is expected to
expand further, driven in part by salary
increases totalling 4.5 per cent to public sector
workers, including retroactive pay. The rise
in government spending may however be
compounded by the impact from the first full
year of a number of the fiscal incentives
announced in 2018, including reductions in
the rates of corporate and income tax.
Measures to improve the efficiency in tax
administration and higher economic growth
may help to mitigate this adverse impact.
T
he outlook for 2019 is however subject to
some notable downside risks.
As far as
external developments are concerned, the
IMF’s WEO (April 2019) report notes that
global economic growth is projected to
weaken slightly in 2019. Global economic
activity is forecasted to be 3.3 per cent in
2019, below its initial projections. The
slowdown emanated from ongoing trade
tensions, challenges with reaching a Brexit
agreement and a slowdown in China. The
slowdown has been evident in many advanced
economies including many in Europe, and
could adversely affect foreign demand for
tourism services and investment in the
regional economies. Meanwhile, growth in
the United States of America is projected to be
favourable with growth of 3.1 per cent in
2018. The pace may nevertheless decelerate
amid continuing trade tensions and a
slowdown in global growth. If these risks
materialise, it may undermine global
economic growth and weigh on the economic
performance of the ECCU member states,
including St Vincent and the Grenadines.
Although initial projections suggest an
increase in stayover arrivals from the ongoing
operations of the international airport, this
expansion may not materialise as the sector