WASHINGTON, CMC -The International Monetary Fund (IMF) says economic activity is on a solid recovery path in Antigua and Barbuda after a sharp decline during the coronavirus (COVID-19) pandemic.

It said growth is projected at 7.8 and 5.5 per cent for 2022 and 2023, respectively, on the back of robust tourism and construction activity.

According to the Washington-based financial institution, which concluded a mission to the Caribbean island last weekend, the number of stayover tourists bounced back, reaching 98 per cent of pre-pandemic levels during the first four months of 2023, with arrivals from the United States and the United Kingdom taking the lead.

Accordingly, the IMF said real gross domestic product (GDP) is expected to recover to its pre-pandemic level this year, noting that after peaking at 9.2 per cent at end-2022, inflation has since receded to 4.6 per cent year-on-year by March 2023, partly driven by a decline in fuel prices.

The IMF said the government’s efforts to boost revenues are helped by strong growth but the fiscal situation remains challenging with elevated debt and high financing needs.

“Preliminary budget outturn suggests a primary deficit of 1.4 per cent of GDP for 2022. The deficit was smaller than that in 2021, but higher than projected by the authorities and the IMF staff in the 2022 Article IV Staff Report.

“Public debt-to-GDP is estimated to have declined to 87 per cent by end-2022 from 97 per cent at end-2021 on the back of strong nominal GDP growth,” the IMF said, adding that the authorities should continue their efforts to streamline tax exemptions, strengthen tax compliance and administration, and improve public spending efficiency.

“There are ongoing initiatives to enhance coordination across different social transfer programmes and digitise information; these should be accompanied by efforts to broaden coverage and improve targeting and monitoring of the social safety net. In addition, the authorities should work with domestic and external creditors to clear existing arrears and avoid the accumulation of new arrears,” it continued.

The IMF went on to say that strong economic recovery combined with global food and fuel prices down from their highs last year, provides a window of opportunity to put public finances on a sustainable footing, while protecting the vulnerable.

The IMF mission said that the financial sector is stable and liquid, with non-performing loans declining gradually.

“Bank credit to the private sector remains subdued, especially in relation to the growth in economic activity, reflecting a number of several factors including a wait-and-see approach taken by potential borrowers and economic uncertainty.

“ Authorities should monitor the credit growth of credit unions and further strengthen supervision and regulation of the credit union sector. The non-performing loan ratios of commercial banks and credit unions modestly exceed the prudential level of five per cent,” the IMF said.

The IMF is urging the Antigua and Barbuda authorities to maintain strong loan loss provisioning, which is currently above the Eastern Caribbean Central Bank (ECCB) prudential level of 60 per cent for both banks and credit unions.

But it acknowledges that Antigua and Barbuda faces increasing challenges from natural disasters and has a need to upskill workers.