The International Monetary Fund (IMF) Executive Board concluded its 2024 Article IV consultation with St. Lucia on February 7, 2025. The board reviewed and endorsed the staff appraisal of the Caribbean nation's economic situation.
St. Lucia's economy, heavily reliant on tourism, has shown signs of recovery following the pandemic. Gross Domestic Product (GDP) growth is projected at 3.7% for 2024, supported by robust tourism, construction, and manufacturing activities. Unemployment rates have fallen to their lowest in a decade but remain high at 14%. Recent government initiatives include the introduction of a minimum wage and increased pensions, alongside plans for an unemployment insurance scheme.
Inflation has decreased significantly from a peak of 6.4% year-on-year in 2022 to just 0.8% in June, attributed to lower utility and energy prices as well as a reduction in Value Added Tax (VAT). The current account deficit narrowed to 1.9% of GDP in 2023 due to a resurgence in tourism; however, the fiscal deficit widened to 2.6%, with debt levels increasing slightly to 74.5% of GDP.
Looking ahead, growth is expected to slow down once planned infrastructure projects are completed, settling at around 1.5% over the medium term. Inflation may rise slightly as global input costs stabilize, while fiscal deficits are anticipated to fluctuate due to higher capital expenditures.
The IMF Executive Directors praised St. Lucia's strong economic performance driven by tourism but noted that medium-term growth prospects appear less favorable due to investment delays and reliance on tourism.
"Prudent policies and reforms should aim to reduce debt, increase productivity, and boost potential growth," stated the directors.
They emphasized sustained fiscal consolidation while maintaining support for capital projects and resilience against natural disasters through comprehensive tax reform and better expenditure control.
Further recommendations included strengthening financial sector regulations by reducing non-performing loans (NPLs), enacting foreclosure legislation, enhancing credit union oversight under the new Co-operative Societies Act, improving risk monitoring in insurance sectors, and addressing Anti-Money Laundering/Combating Financing Terrorism (AML/CFT) regulatory gaps.
Directors also highlighted structural reforms necessary for diversifying St. Lucia's economy and enhancing disaster resilience investments.
"Noting the implications for external competitiveness," they urged careful calibration of minimum wages with stakeholder consultations while encouraging geothermal energy development efforts.