IMF: Weak Demand, Banana Crop Hold Back Dominica’s Economic Recovery

 

While Dominica’s authorities’ public investment has helped the country withstand a challenging economic environment, weak demand and the outbreak of the Black Sigatoka banana disease will “continue to hold back” a recovery, according to the International Monetary Fund.

The IMF recently concluded a mission to Dominica led by Aliona Cebotari for the 2012 Article IV consultation on economic developments and macroeconomic policies in the country.

The fund said growth would remain “subdued” this year, gradually increasing to around 2 percent over the medium term.

“Against this background, the discussion between the authorities and the IMF staff focused on policies needed to maintain fiscal sustainability without derailing the economic recovery and on ways to safeguard the stability of the financial system,” Cebotari said.

Dominica has little room to maneuver on the fiscal front, however, with low growth putting “increasing strains” on the fiscal position, with “limited policy space to support activity.”

“Without monetary or fiscal policy room to support the recovery, the main policy focus should turn to engaging the private sector through structural reforms that would boost competitiveness and productivity, and improve the country’s long-term growth prospects,” she said. “These reforms could entail measures that will minimize the costs of doing business, increase access to finance by setting up a credit information bureau and facilitating collateral recovery, and improve the quality of public expenditure.”

The banana disease mentioned is Black Sigatoka, which has been a growing threat to the Caribbean’s banana crop.

Dominica is one of several countries working to develop a regional plan to fight the disease, which is a fungus that targets banana leaves.

It can cut banana crop production by 50 percent for a given tree.

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Date Posted September 12 2012