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Antigua And Barbuda Economy Recuperating

by Jason Gorringe,, London

22 February 2013

The economy of Caribbean territory Antigua and Barbuda is expected to begin recovering this year from a deep three-year recession, allowing the Government to start to rein in the deficit.

With the economy having contracted by over 20% in the last three years on the back of weak tourism and construction activity, the territory is expected to have returned to growth of 1% of gross domestic product in 2012.

The territory has achieved significant fiscal savings under a successful debt restructuring deal with international and domestic creditors. Fiscal consolidation and debt relief led to a decline in the ratio of debt to gross domestic product from over 100% in 2009 to around 90% in 2011. Debt is expected to have risen in 2012, however, on the back of government support for the Antigua and Barbuda Investment Bank.

The Government now aims to balance supporting the economy with fiscal consolidation, debt restructuring and comprehensive reforms of revenue administration and public financial management, to put the territory's public debt firmly on a downward trajectory.

The IMF's Executive Board stressed the importance of improving public financial management and expenditure rationalization, without constraining much-needed capital spending. It stressed the need to broaden the tax base, especially by eliminating tax exemptions, to enhance revenues.

The IMF reported that the banking system has felt the effects of the economic contraction, and underscored the importance of continued efforts to bolster financial sector stability. It emphasized the need for stronger supervision of banks and non-bank financial institutions, including through consolidated supervision of financial conglomerates. Lastly, the Fund recommended tightening regulations on asset classification and loan loss provisioning, and introducing risk-based supervision, with more frequent on-site examinations of banks.

To improve the territory's economic growth prospects, the Board emphasized the need to diversify the economy, and enhance the territory's competitiveness, including by improving the business climate.

TAGS: environment | tax | investment | business | interest | training | banking | gross domestic product (GDP) | international financial centres (IFC) | offshore | offshore banking | Antigua and Barbuda | construction | regulation

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