ROSEAU, Dominica: Amidst the global economic crisis, the International Monetary Fund (IMF) has identified Dominica as the most resilient nation in the Eastern Caribbean.
In an assessment released last week, the IMF pointed to declines in tourism arrivals, foreign direct investment inflows and remittances as a result of the crisis. However, the GDP declined by only 0.3 per cent in 2009 and the effects on the Dominican economy were less severe than other Eastern Caribbean Currency Union (ECCU) economies.
“The executive directors noted that the Dominican economy has been more resilient to the global crisis than other ECCU countries and that its near to medium-term outlook is positive,” the IMF release stated, adding that with the recovery of the global economy and expected improvements in international trade and tourism activities, the economy is expected to grow by 1.5 per cent this year.
“Directors welcomed the authorities’ Growth and Social Protection Strategy, which is appropriately aimed at guiding the economy toward fostering growth and reducing poverty while lowering public debt. Downside risks relate to a slower global recovery, possibly implying weaker demand for tourism.”
The directors commended the authorities’ “prudent fiscal policy stance” in recent years, which has placed public debt on a declining path and allowed the government to respond to the global downturn by keeping capital spending in 2009 at high levels. They encouraged the authorities to reduce the debt-to-GDP ratio further, thus maintaining the ability to respond to external shocks.
However, most of the IMF’s directors expressed concern that large externally financed projects could significantly slow the pace of decline in the debt-to-GDP ratio.
They said the expenditure that the authorities have contemplated on a large new tourism project carries considerable commercial risks. The directors have therefore recommended conducting an objective and independent assessment of the project, obtaining financing on concessional terms where feasible and, if the project proceeds, exploring partnerships with the private sector.
“A few directors were of the view that some flexibility in borrowing and a temporary deviation from the declining debt trend with prudent policies should not be ruled out,” the IMF said.
The directors also stressed the importance of strengthening the supervision of the financial sector, including on-site examination of the insurance companies and credit unions.
They welcomed the establishment of a single regulatory unit for the nonbank sector as well as the authorities’ regional approach to address the collapse of the Trinidad and Tobago-based CL Financial Group.