The Fiscal Responsibility Oversight Committee (FROC) believes that the projected 3.6% growth in the economy this year could be achieved if the Congress government pursues and implements its policies and programmes as planned.
Newly appointed FROC Chairperson, Economist, Laurel Bain, shared the Committee’s view on the projected growth rate during a live press conference last week Thursday in presenting the annual FROC report for the 2022 fiscal year, prepared in accordance with the Fiscal Responsibility Act (FRA), and submitted to the Speaker of the House of Representatives on March 31, 2023.
“The FROC examined the government’s strategies, policies, programmes, and projects for 2023 to determine whether the growth rate projected was achievable – the conclusion was that if the programmes, policies, and strategies are implemented as scheduled, effectively, and in a coordinated manner, despite the risk in the global economy, which we know, particularly the unpredictability of the macro-economic development, developments in the financial sector, high inflation and also there is always the threat of climate issues, including threats to the inflows from Citizenship by Investment programme, we note that if the plans and programmes are implemented as planned, the growth rate could be achieved,” she said.
The government is projecting that the economy will grow on average 4.1% between 2023, and 2025.
In 2021, there was a growth in GDP of 4.7%, while the economy grew by 6% in 2022.
Bain alluded to a gradual increase in government finances, which is estimated to reach an overall surplus of “$62 million in 2023, or 1.8 percent of GDP,” a significant leap from the “$30 million or nine percent of GDP” totaled in 2022.
“The financial sector remained stable throughout the period” under review, she said, adding that “the (government’s) finances are expected to improve further to an overall balance of approximately EC$ 146 million, or over three (3) percent of GDP in 2025.
“So, the public finances are projected to strengthen,” said the head of FROC.
The Fiscal Responsibility Act of 2015, which is one of several recommendations of the United States-based International Monetary Fund (IMF) created a Fiscal Responsibility Oversight Committee, which is responsible for monitoring compliance with the fiscal rules, and targets as stipulated in the Act and reporting to the House of Representatives.
The Act provides a framework for the government to operate to ensure fiscal transparency, fiscal discipline, and debt and fiscal sustainability.
Bain, a retiree of the Eastern Caribbean Central Bank (ECCB) with over 25 years experience in central banking, highlighted the two (2) main components under the “rules-based framework,” as outlined in the Act to be upheld by the government.
These are “a growth in primary expenditure of no more than two percent in real terms for a government and the public entities, a wage bill of no more than nine percent of GDP, a debt to GDP ratio, of not more than 55 percent, liabilities of public and private enterprises, or partnership of not more than five percent of GDP, and when the debt to GDP ratio reaches 55%, a minimum primary balance of 3.5% of GDP.”
According to Bain, “Central Government’s account was in accordance with the rules and targets for all the rules except the debt.”
The public sector debt to GDP ratio moved from EC$2.1 billion (66.2%) at the end of June 2022 to over EC$ 2 billion at the end of the year.
However, she pointed out that “in 2022, it (the debt to GDP ratio) is estimated to be 64%of GDP, and to decline further to 60% of GDP by 2025.”
“When we include the statutory bodies, and Public Enterprises, in 2022, we get a public sector debt of 69% of GDP, or EC$2.2 billion….and when we include the petrocaribe debt, the debt increases to EC$2.5 billion, or 80% of GDP.”
On the occasion of his debut appearance in Parliament shortly after coming to power following the June 23, 2022 general election, Prime Minister Dickon Mitchell placed on record his government’s commitment to the Fiscal Responsibility Act and debt reduction.
He spoke of plans to implement strategic measures to reduce or cease borrowing unless necessary and to grow the economy through investments in areas, and sectors that can support economic growth.