Soft landing forecast for ECCU economy in 2008 as a result of global outlook
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Murilo Portugal
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BASSETERRE, ST. KITTS, FEBRUARY 12TH 2008 (CUOPM) – The number two man at the International Monetary Fund (IMF) is pleased with the Eastern Caribbean Currency Union (ECCU) governments’ commitment to fiscal consolidation, with important reforms to place fiscal balances on a firmer footing underway in many countries-including through the introduction of value-added taxes and efforts to overhaul government expenditures, focused on enhancing efficiency of capital spending and civil service reform.
“These efforts will be key to lowering debt levels and strengthening the currency union,” said Deputy Managing Director at the Washington-based financial institution, Murilo Portugal.
Portugal, who was on his first visit to the Eastern Caribbean region as Deputy Managing Director of the International Monetary Fund attended the 61st Meeting of the ECCB Monetary Council met with Prime Ministers, Finance Ministers, and the Governor of the Eastern Caribbean Central Bank.
“My discussions with the authorities focused on the economic prospects, opportunities, and challenges facing the ECCU,” said Portugal in a statement. ~~Adz:Right~~
He noted that in recent years, the ECCU region has benefited from the record global expansion, and most countries enjoyed growth rates not seen in a decade.
“Activity was driven by construction spending for the 2007 Cricket World Cup, and a significant expansion in tourism capacity. Inflation has remained low and well anchored by the regional monetary arrangement overseen by the Eastern Caribbean Central Bank,” said Murilo, who noted that the inflationary pressures that have emerged due to the strong economic activity and higher world oil and food prices should be temporary.
He added that despite higher revenues, however, limited progress has been made towards fiscal consolidation, and the regional debt ratio remains above 100 percent of GDP.
“In the wake of several years of strong growth in global and regional economies, my visit is taking place at a time of greatly increased uncertainty about the global outlook. Our forecast is for a soft landing of the ECCU economy in 2008, but there are important downside risks,” he said, pointing out that turbulence in U.S. asset markets and slowing global growth could weaken the outlook in the tourism and construction sectors.
He said that efforts to sustain rapid growth are thus particularly important and he was encouraged to learn about ongoing reforms intended to improve the investment climate, financial market development, and continuing regional integration.
“Regional integration continues apace, as evidenced by the approval of the Organisation of Eastern Caribbean States Economic Union Treaty in 2007,” said Portugal.
He said that his visit to the region is evidence of the increasing importance that the Fund has been placing on the role of regional arrangements in the surveillance process.
“In fact, last week the IMF's Executive Board completed the 2007 Discussions on the Common Policies of the ECCU. These discussions augment the work of the individual country Article IV consultations and cover those issues that cut across the currency union,” Portugal said.
He disclosed that a report reflecting these discussions will be published shortly.
