Saint Vincent and the Grenadines
Annual Economic and Financial Review: 2022

Overview

• The economy of Saint Vincent and the Grenadines is estimated to have expanded further in 2022 relative to the previous year.
  
• The improved performance largely reflected recoveries in the tourism, construction and wholesale and retail trade sectors.
  
• More recent geo-political developments, however, particularly the war in Ukraine which has increased commodity prices, have tilted the balance of risks slightly to the downside.

Snapshot of Economic and Financial Developments for 2022 - Saint Vincent and the Grenadines

The Economy (Real Sector)

The economy of Saint Vincent and the Grenadines is estimated to have expanded by 5.0 per cent in 2022, compared to an increase of 0.8 per cent in the previous year (Figure 1). Increases in value added were recorded for some pivotal sectors, contributing positively to GDP.

One such key sector was Accommodation and Food Services, which rose by 47.1 per cent. This outturn reflected higher performance in the tourism industry, as total visitor arrivals increased to 221,379 from 56,759 in 2021. The outturn, however, was still below the 5-year average of 254,959. Expansion was seen in the number of visitors from all major markets. Likewise, all visitor categories recorded higher performances primarily, cruise ship passengers from 24,311 to 120,315 in 2022 and yacht passengers from 8,079 to 38,452 in 2022. The stay-over category, which is relatively more important due to its higher average daily visitor expenditure, grew from 24,230 in 2021 to 62,303 during the period under review (Figure 2).

This development had positive knock-on effects in supporting sectors including transportation and storage (33.0 per cent), wholesale and retail trade (10.0 per cent), construction (15.0 per cent) and manufacturing (12.0 per cent). The performance was tempered by declines in agriculture, forestry and fishing (6.1 per cent), and financial and insurance activities (1.2 per cent).

Consumer Prices

Figure 3 shows the movements in the consumer price index, which were broadly consistent with improved real sector developments and global price pressures. The consumer price index rose by 6.7 per cent during 2022, in comparison to a 3.4 per cent increase during 2021. Upward movement of the index, largely reflected higher prices for food and non-alcoholic beverages (14.8 per cent), housing, water, electricity, gas and other fuels (2.7 per cent), transport (13.3 per cent) and restaurants and hotels (13.8 per cent).

Government Operations

Given the recovery from the pandemic and the volcanic eruption in 2021, the central government’s fiscal operations resulted in a widening of the overall deficit (Figure 4) to $181.4m (7.1 per cent of GDP), compared with one of $151.8m (6.4 per cent of GDP) in 2022. The expansion in the overall deficit was attributable to increase in spending on the capital account. Capital expenditure rose by 5.0 per cent to $243.1m (9.5 per cent of GDP) compared with a 9.7 per cent expansion in the previous year, as work continued on a number of public infrastructure projects. Also, accounting for the widening of the overall deficit was the decline in grants from $61.8m (2.6 per cent of GDP) to $50.4m (2.0 per cent of GDP) in 2022.

However, there was a slight improvement on the revenue side. Current revenue grew by 0.3 per cent to $681.3m(26.6 per cent of GDP) in 2022 compared with $679.5m (28.9 per cent of GDP) in the prior year. This was driven by an increase of 0.8 per cent in tax revenue to $641.8m (25.1 per cent of GDP) in 2022 compared with an increase of 12.9 per cent to $637.1m (27.1 per cent of GDP) in the previous year. Improvements were seen in all tax categories, except for taxes on property, which saw a decline of 60.3 per cent as higher than normal land sales occurred in the Grenadines in the prior year.

There was also, a reduction on the current expenditure account. Current expenditure declined by 3.1 per cent to $915.8m (35.8 per cent of GDP) in 2022 in contrast to an increase of 8.1 per cent to $925.6m (39.3 per cent of GDP) in the previous year. Major contributors to the lower expenditure included a reduction in compensation of employees and transfers and subsidies.

Banking Developments (Monetary)

Broad money in the banking system expanded by 0.2 per cent to $1,856.9m (72.5 per cent of GDP), compared with a 12.8 per cent increase at the end of 2021. This increase reflected an uptick in currency in circulation. Domestic claims (credit) grew by 1.0 per cent to $1,087.2m (Figure 6), largely driven by an increase in claims on the central government (17.9 per cent. The expansion was attributable in part by an increase in claims from the central bank of 39.1 per cent, and mitigated by an uptick in central government deposits of 7.4 per cent.

Liquidity in the domestic banking system remained adequate as the net liquid asset to total deposits ratio rose a further 0.9 percentage points to 48.1 per cent at the end of December 2022. Non-performing loans to gross loans rose to 10.1 per cent, 2.3 percentage points above the ratio at the end of 2021 and above the ECCB prescribed ceiling of 5.0 per cent (Figure 7).

External Trade

A merchandise trade deficit of $1,075.9m (42.0 per cent of GDP) was recorded, compared with one of $912.3m (38.7 per cent of GDP) in 2021 (Figure 8). The widening of the imbalance was largely attributable to an increase in import payments (19.5 per cent) to $1,202.3m from $1,005.8m, consistent with the economic recovery. Growth in import payments was tapered by an increase in export earnings, which rose to $126.5m from $93.4m in 2021. The rebound in visitor arrivals resulted in an expansion in, gross travel receipts to $169.5m from $77.9m in 2021. This outturn was still, significantly below the 5-year average of $210.6m.

Outlook

The economy of Saint Vincent and the Grenadines has made significant progress in the recovery process after it was adversely affected by the dual shock in 2021; specifically, the eruption of the La Soufriere Volcano and the COVID-19 pandemic. This recovery was fuelled by key government support and planned public and private sector investments. The economy is projected to continue on its trend of expansion in 2023. Notwithstanding the improved domestic outlook, emerging risks threaten to upend economic prospects. Prominent among these risks are: geo-political conflicts in Russia and Ukraine, the rising commodity prices, and supply chain disruption. Risks are therefore skewed to the downside and include:

Selected Economic Indicators