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International Monetary Fund. Western Hemisphere Dept.

IMF Country Report No. 21/157

International Monetary Fund. Western Hemisphere Dept.
An explosive volcanic eruption that began on April 9 is hitting St. Vincent and the Grenadines hard, creating an urgent balance of payments need and a humanitarian crisis as the country continues to deal with the fallout from the global pandemic. The economy is estimated to have contracted in 2020 by 3.8 percent as tourism activity fell 70 percent. Before the eruption, economic growth was expected to be flat in 2021, as the global pandemic continued, and tourism remained depressed. While there is considerable uncertainty about the evolution of the eruption, staff estimate the infrastructure damage to exceed 20 percent of GDP and for the economy to contract by 6.1 percent in 2021 with agriculture and related sectors severely affected.
International Monetary Fund. Western Hemisphere Dept.

1. Prior to the start of the global pandemic, economic growth was projected to improve as the structural reforms advanced by the authorities gained traction. The authorities had intensified efforts to diversify the export base, strengthen human capital, improve the investment climate, and build infrastructure resilient to natural disasters. A new airport had reinvigorated tourist and investor interest. Following a period of underperformance following the global financial crisis, growth was expected to improve this decade, supported by increased tourism arrivals and construction projects—including a large-scale port modernization project—and a pick-up of crops and fisheries’ exports.

International Monetary Fund. Western Hemisphere Dept.

The Vincentian authorities thank staff, management, and the Executive Board for the speedy response to the request for emergency financing. The volcanic eruption took place amidst the ongoing COVID-19 pandemic and the combined effect of these events have taken a heavy economic and social toll on St. Vincent and the Grenadines. The authorities request a purchase of SDR 8,172,450 equivalent to 69.85 percent of quota, under the Large Natural Disaster (LND) Window of the Rapid Credit Facility of the Poverty Reduction and Growth Trust. This support will help address an urgent balance of payments need and catalyze additional finances from other international financial institutions.

International Monetary Fund. Western Hemisphere Dept.
The fallout from the COVID-19 crisis is hitting ECCU economies hard. Tourism receipts (accounting for nearly 40 percent of GDP) have dried up, as tourist arrivals have come to a grinding halt. The authorities successfully contained the spread of the virus at the onset of the pandemic by largely closing the borders, but a reopening of the economies since the summer has led to a surge in COVID cases. The ECCU economy is projected to contract by 16 percent in 2020 and by a further near ½ percent in 2021. Fiscal positions have deteriorated sharply, and public debt is projected to reach near 90 percent of GDP in 2021 and remain at an elevated level for years to come. Headline indicators suggest the financial system is relatively sound with ample liquidity buffers, but nonperforming loans are expected to rise significantly. The outlook is clouded by exceptionally high risks, including from the uncertainty concerning the evolution of the pandemic.