March 18, 2025
Antigua and Barbuda’s economy has continued to expand post-pandemic, with real output surpassing pre-pandemic levels in 2024, driven by robust tourism and significant events like the 4th International Conference on Small Island Developing States and the T20 Cricket World Cup. Growth was estimated at 4.3%, although inflation was elevated due to specific items and increased indirect taxes.
The recovery in nominal GDP and improved fiscal balances reduced public debt from around 100% of GDP in 2020 to 67% in 2024. Despite this, gross financing needs are projected to remain around 10% of GDP in the medium term, with substantial domestic and external arrears limiting financing options. The fiscal primary balance improved to 4.6% in 2024, aided by indirect tax increases, broader economic recovery, and one-off factors. The 2025 Budget anticipates stronger tax revenues and higher capital spending.
Preliminary estimates from the Eastern Caribbean Central Bank (ECCB) indicate that the current account deficit narrowed to 7% of GDP in 2024, due to a higher service trade balance and a smaller goods deficit. Foreign direct investment (FDI) inflows remained resilient, supporting ongoing hotel construction. Credit growth is recovering, with nonperforming loans contained.
The executive board’s assessment following the 2025 Article IV consultation endorsed the staff’s appraisal, noting that economic activity, boosted by tourism, has surpassed pre-pandemic levels. Growth is expected to moderate from 3% in 2025 to 2.5% over the medium term. Inflation pressures from 2024 are expected to dissipate, though the external position remains moderately weaker than desired.
Efforts to raise revenue and address debt challenges have been fruitful, but further steps are needed to restore debt sustainability and reduce gross financing needs. Risks are tilted to the downside, including global uncertainty, commodity price volatility, and climate-related vulnerabilities. Upside risks include stronger tourism demand, improved air connectivity, new cruise port facilities, and productivity-enhancing reforms.
Addressing external and domestic arrears is crucial for broadening financing options. While the reduction in nominal debt is welcome, outstanding arrears remain obstacles to debt sustainability. Efforts to address debt challenges, bolster revenues, and improve public financial management are critical, especially given climate change vulnerabilities.
Recent improvements in tax revenue are positive, but further domestic revenue mobilization is needed for fiscal sustainability. Near-term priorities include tighter control of tax exemptions, transitioning to HS2022 classification in customs, and modernizing property taxation. Enhancing social assistance programs and streamlining fiscal institutions and oversight are also recommended.
Regional coordination is key to reinforcing financial stability and promoting financial inclusion. The financial sector is broadly stable, with recovering credit growth and non-performing loans approaching prudential levels. Initiatives like the regional credit bureau and climate risk measures should boost credit quality and financial intermediation.
Intensifying reforms to improve the business environment will support potential growth by addressing obstacles such as workforce education, access to finance, and trade regulations. Targeted efforts to increase educational opportunities and improve employer-employee matching are warranted.
Source: (Caribbean News Global)
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