The Executive Board of the International Monetary Fund (IMF) has concluded its Article IV consultation with the member countries of the Eastern Caribbean Currency Union (ECCU). The board endorsed the staff appraisal without convening a formal meeting.
In 2024, the ECCU experienced a strong economic performance driven by tourism and infrastructure investments, achieving a growth rate of 3.9 percent. Inflation decreased to below 2 percent, aligning with global trends. Despite these positive indicators, public debt remains high at over 71 percent of GDP, and progress in reducing current account deficits has stalled. The Eastern Caribbean Central Bank's stable reserves continue to support a strong currency backing ratio, while the financial system shows stability despite some weaknesses in asset quality and credit conditions.
However, growth momentum is expected to slow due to constraints in tourism capacity and completion of major infrastructure projects. Real GDP growth is projected to decrease to around 2½ percent over the medium term. This outlook reflects challenges such as weak productivity, limited local investment, an aging population, and constrained fiscal space for public investment.
Risks remain on the downside due to an uncertain external environment. Global trade tensions and geopolitical uncertainties could disrupt tourism and foreign direct investment inflows, leading to renewed inflationary pressures. High public debt levels and persistent current account deficits add to vulnerabilities alongside potential natural disaster shocks.
The IMF Executive Board noted that "the ECCU has achieved a strong rebound from successive adverse shocks." It emphasized that "strong tourism performance and continued infrastructure investments have supported robust post-pandemic growth."
To ensure long-term sustainable growth, regional policies should focus on enhancing economic resilience by addressing structural impediments like employment frictions and skills development through vocational training and education reforms. Efforts should also aim at improving fiscal management by adopting medium-term fiscal frameworks with credible policy plans.
The board highlighted that "enhancing financial system resilience" is crucial for supporting local investment. Reducing legacy bank balance sheet weaknesses and mitigating risks from rapid credit union expansion are among the priorities.
Additionally, strengthening economic data collection could significantly improve policy design across the region by addressing gaps in coverage, quality, and timeliness.