BUSINESS MONDAY: IMF: Dominican economy hit hard by TS Erika
Mon, 04/18/2016 - 12:00am
AS a result of Tropical Storm Erika, the estimated economic output for Dominica has declined by 3.9 per cent in 2015.
This is according to the International Monetary Fund (IMF), in a recently concluded mission to conduct 2016 Article IV consultation, “Tropical Storm Erika hit the Dominican Economy hard”.
Tropical Storm Erika of August 29, 2015, was the deadliest natural disaster in Dominica since Hurricane David in 1979, which killed at least 30 people and left dozens missing, devastated villages, destroyed bridges and left a reconstruction bill worth half the country’s annual GDP.
In response to Dominica’s plea for assistance, the Barbados Government pledged US$100 000 towards the rebuilding efforts.
Led by Mr. Alejandro Guerson, the IMF issued a statement at the conclusion of their mission to Dominica, which stated, “Tourism activities have largely normalised following the resumption of full operations at the main airport, and visitor arrivals showed some recovery, but other sectors will likely need more time to be fully restored.”
The report indicated, “Agriculture output declined sharply as the storm affected crops and access to arable land, and significant areas are now in need of re-planting and soil treatment. Manufacturing has taken a significant toll as the storm prompted the closure of operations of the main industrial plant.”
In addition, the report stated, “The protracted decline of banks’ credit to the private sector remains a drag on economic activity, underpinned by high non-performing loans. Despite weak exports of agriculture and tourism, the 2015 current account deficit remained contained at an estimate of 9.4 per cent of GDP on the back of lower oil imports.
“In 2016, output growth will remain subdued at 1.3 per cent as the economy slowly recovers from the storm and investment in reconstruction picks up. According to expectations, this growth will be highly dependent on donor grants.”
The IMF is projecting growth to accelerate somewhat as the economy continues to recover and stabilise at 1.7 per cent per year over the medium term.
“Going forward, fiscal policy should be calibrated to allow space for reconstruction expenditure with fiscally sustainable bounds, consistent with the regional debt target commitment.”
The IMF mission suggests that the Dominican “government’s main focus should be on diversification of agriculture; investment in public infrastructure; increase of labour productivity; and the reduction in electricity tariffs”.
According to the report, other priority areas are to “further support private sector investment; the Government should adopt measures to enhance the business climate; devise a strategy for diversification into broader set of areas in addition to agriculture; and improve access to finance”.
Improving and enforcing construction and zoning codes is of paramount importance, says the IMF and exploring alternative sources to reduce the cost of electricity is also a necessity for a successful road to recovery. (KW)