WHILE economic activity in St Vincent and the Grenadines is rebounding from the economic fallout associated with the novel coronavirus and the devastation of La Soufrière’s eruption in April last year, Minister of Finance, Economic Planning and Information Technology Camillo Gonsalves says the country is still about a year away from recovery.

Speaking to the Jamaica Observer on the sideline of the Caribbean Development Bank’s (CDB) 52nd Annual General Meeting of the Board of Governors, Gonsalves said that the country’s economy did not shrink due to the double crises, as projected by the International Monetary Fund (IMF), but realised “marginal growth”.

“When the volcano erupted the IMF’s estimate immediately afterwards was that the economy would contract by about seven per cent, coming after a projection of growth of three per cent. We didn’t contract by that much; we actually had marginal growth that year fuelled by construction to rebuild everything that was destroyed,” the minister shared.

“That doesn’t mean that economic activity is back where it should be. So we’re projecting economic growth but we’re not projecting economic recovery going forward,” he continued.

In the aftermath of the eruption of La Soufrière volcano, the IMF disbursed US$11.6 million under the Large Natural Disaster Window (LNDW) of the Rapid Credit Facility (RCF) – the first of its kind. A staff report also estimated that St Vincent and the Grenadines would lose up to 30 per cent of gross domestic product (GDP) as result of damage to infrastructure, housing and crop.

Gonsalves noted that the volcanic eruption had its most severe impact in the agricultural belt of the country which coincides with La Soufrière’s red and orange zones.

“So the eruption of the volcano devastated agricultural production in St Vincent and the Grenadines, which is a key component of the economy,” he told Caribbean Business Report.

The finance minister also related the ordeal of banana farmers, many of whom had to stay in shelters for up to six months, then after returning home had to clear feet of ash for another two months to prepare their land for production. Thereafter, they had to wait up to nine months to reap from their banana trees.

In this regard, he pointed out that the Government of St Vincent and the Grenadines has had to dole out funds to support lives and livelihoods while the country recovers slowly. While the recovery process has been “doubly difficult”, Gonsalves said the people are resilient.

“But we are certainly seeing more green shoots literally and figuratively today than we saw a few months ago. So we are optimistic that we can return to pre-volcanic eruption levels [of economic activity] hopefully in the next 12 months,” he beamed.

When Caribbean Business Report asked how the Government has been able to provide income support for displaced Vincentians, Gonsalves pointed to the country’s contingency fund.

“One of the things the Government had done in advance a few years ago was to create a contingency fund from one percentage point of our VAT. We ring-fenced and place it in a fund to deal with disasters,” he stated.

“We also had to borrow money from the World Bank, European Union and Caribbean Development Bank, so our debt has increased but it’s a legitimate expense in light of the challenges faced by the the people of St Vincent and the Grenadines,” the finance minister continued.

Gonsalves commended the CDB for being an “indispensable partner” that has assisted with the country’s recovery efforts, which were further impacted this year by global inflation and the Russia-Ukraine conflict. He also pointed out that the regional bank is the largest lender to the borrowing member country and has a “sensitivity” to the needs of St Vincent and the Grenadines because it understands the development path it is on.

At the same time, the country has received debt relief from the Government and people of Venezuela for monies owed under PetroCaribe. While the move has provided the Eastern Caribbean nation with “a significant amount of fiscal space”, the finance minister said he is seeking for other governments to do the same.

“But with economic growth and rebound, some of these challenges of debt to GDP will diminish,” Gonsalves told Caribbean Business Report.

“It’s a process. It’s not an easy one, but it’s better to balance livelihoods than balance an accounting book and we go that way,” he concluded.