The World Bank in the Eastern Caribbean

Antigua and Barbuda, the Commonwealth of Dominica, Grenada, Saint Kitts and Nevis, Saint Lucia, and St. Vincent and the Grenadines are members of the World Bank.

These Organization of Eastern Caribbean States (OECS) countries are small states with a combined population of approximately 625,000. Their small size limits access to economies of scale, which in turn shapes the structure of the economy by limiting diversification and the composition of international trade, and increases exposure to volatility, natural disasters, and other shocks. Size also affects returns to scale in the public sector, which has implications for government capacity and the organization and financing of service delivery.

Economic Outlook

The OECS is heavily dependent on tourism, which contributes to 39 percent of the Gross Domestic Product (GDP) on average and accounts for 11 percent of the region's jobs. This means that the economic performance of OECS countries is influenced by what happens in the tourism sector, as well as the economic cycles in the main tourism source markets, including the USA, Canada, and Europe. This dependency was particularly evident during the aftermath of the Global Financial Crisis (GFC) and the COVID-19 pandemic. Relying on tourism also makes the region vulnerable to the effects of extreme weather events, as they can disrupt tourist arrivals and further impact the economy.

In Dominica, the economy relies on tourism and is supported by significant public investment funded by citizenship by investment revenues. The development of geothermal resources and the construction of an international airport are expected to boost both structural and potential growth.

Economic growth has helped mitigate losses from disasters, and efforts to keep inflation low aim to reduce poverty in the medium term. Dominica is still affected by fluctuating food and fuel costs, economic impacts of global political events, and reliance on unpredictable central bank revenues.

Grenada's economic growth in 2023 is expected to be modest at 3.9%, with an average of 3.7% in the medium term, as tourism and construction are expanding slowly. Nevertheless, strong private investment will support construction and implementation of resilience and climate reforms will have a positive impact on the economy. Inflation is predicted to peak at 3.0% by the end of 2023.

A robust recovery in tax revenue, along with measures like increasing the VAT on "sin" products is expected to balance out extra spending and maintain the primary financial target in the medium term. Public debt will decrease, supported by economic growth, fiscal surplus, and lower debt payments, projected to reach 55.1% of GDP by 2025.

The Disaster Risk Strategy (DRS), aimed at detailing a comprehensive plan including policies, cost, and financing for building resilience to natural disasters and climate change, will help mitigate climate-related risks.

Saint Lucia's growth is expected to be moderate at 3.6% in 2023, with a further slowdown in the medium term. This growth will be supported by increased tourist arrivals and major construction projects, such as airport renovations and hotel construction, peaking in 2024. Reduction in poverty will continue, though at a slower pace in the medium term, and inflationary pressures are expected to ease.

St. Vincent and the Grenadines is expected to maintain strong growth at 6.0 percent in 2023 and 4.8 percent in 2024, driven by a rebound in tourism that surpasses 2019 levels. Poverty is expected to follow a similar path. Tourism growth over the medium term will be further supported by a new airport and additional hotel and resort facilities.

The government has taken measures to rebuild fiscal reserves, including replenishing the contingency fund after using it in response to the volcanic eruption. These measures involve prioritising public investment in port modernization and a new hospital while reducing other projects, increasing customs service charges, improving taxpayer compliance, and reforming pension funding.

The main goal of the World Bank’s work in the OECS is to help countries boost economic growth and competitiveness as they bounce back from multiple crises, focus on their development goals for the near future, and strengthen their ability to withstand climate change and other external challenges.

Strengthened Resilience to Climate Change and Other Shocks

Preserving the marine and coastal ecosystems is vital to safeguard the foundation of economic activities and development, which relies on the richness and health of these natural assets. A proposed regional initiative for the Eastern Caribbean's blue economy seeks to promote sustainable and resilient economic growth by enhancing the sustainability and competitiveness of tourism, fisheries, and aquaculture. The COVID-19 pandemic has significantly affected economic growth and employment in these sectors, with particular hardship for marginalised groups, such as women and youth.

-To aid the revival of these sectors and simultaneously safeguard marine and ocean resources, the Bank will pursue three key strategies:

-Enhancing regional and national policies and institutions to encourage business recovery and attract new investments.

-Expanding innovative financing approaches aimed at boosting employment, productivity, and liquidity within the tourism, fisheries, and waste management sectors.

-Supporting strategic infrastructure investments to reduce risks and encourage private investment in blue economy activities, improve waste management, and enhance resilience to climate change.

The severe economic repercussions of the COVID-19 pandemic have caused a substantial increase in debt levels within the OECS countries, erasing the progress made in recent years. Prior to the pandemic, public debt levels in the OECS countries had significantly decreased. However, it's estimated that the OECS debt burden rose from approximately 69 percent of GDP in 2019 to 85.9 percent of GDP in 2021. Consequently, the region continues to have one of the highest debt-to-GDP ratios globally, which restricts the ability to use fiscal policies for economic recovery and growth.

●      The Bank will provide support for the implementation of fiscal responsibility frameworks across the OECS through policy-based lending, technical assistance, and Performance and Policy Actions (PPAs) under the Sustainable Development Finance Policy (SDFP). This assistance will also enhance debt transparency through the annual publication of debt management reports. These frameworks aim to promote debt sustainability by setting limits on government spending and public debt levels. Additionally, they will establish independent oversight committees to oversee and assess the implementation of these frameworks.

●      Another important area for reform involves enhancing the performance, transparency, and accountability of State-Owned Enterprises (SOEs) by publishing comprehensive financial reports on an annual basis. Additionally, the RPF (Recovery and Resilience Plan) aims to bolster fiscal reserves against external shocks by creating and funding contingency funds. These funds will have well-defined governance structures, criteria for their utilisation, and mechanisms for public accountability.

●      The World Bank has allocated a total of US$56 million in financing for the Unleashing the Blue Economy of the Caribbean (UBEC) project. This initiative is aimed at assisting several Eastern Caribbean countries in harnessing the sustainable economic potential of their marine and coastal resources. Out of this funding, Grenada will receive $15 million, Saint Lucia will be allocated US$18 million, and Saint Vincent and the Grenadines will receive US$15 million. Additionally, there is an IDA grant of US$8 million provided to the OECS Commission for integrated regional initiatives.

●      Furthermore, the World Bank's PROBLUE Multi Donor Trust Fund has extended grant financing of US$1 million to each of the following countries: Grenada, Saint Lucia, and Saint Vincent and the Grenadines, in addition to a US$1 million grant to the OECS Commission.

Improved Human Capital seeks to (i) strengthen the health and skills of the population for greater productivity and prosperity; and (ii) improve financial protection for the poor and vulnerable.

The ongoing Investment Project Financing (IPF) support in St. Lucia and St. Vincent and the Grenadines is expected to achieve several objectives: expanding the coverage of cash transfer programs for the poor and vulnerable and strengthening the human resource capacity to provide social protection programs and services.

●      The bank plans to support the implementation of an improved tool for determining the eligibility of potential beneficiaries in St. Lucia. They also aim to enhance the coverage and efficiency of social protection (SP) systems in the other OECS countries through knowledge support and possible lending operations. Additionally, the expected COVID-19 Recovery Development Policy Operations (DPOs) for the OECS Blend countries will further strengthen income support programs, ensuring they can respond to natural disasters and protect those most affected by the COVID-19 crisis, all while maintaining fiscal and debt sustainability. Special emphasis will be placed on ensuring that social protection systems consider gender-specific needs and are inclusive, catering to the requirements of women and vulnerable groups, especially during natural disasters and other emergencies.

●      Productivity growth and poverty reduction in the OECS countries have faced challenges due to poor learning outcomes in schools, a lack of skills in the population, and a mismatch between workforce skills and labor market needs. To address these issues in St. Lucia and St. Vincent and the Grenadines, the ongoing Bank-financed projects in human development and human capital resilience will take the following actions:

         - Strengthen Technical and Vocational Education and Training (TVET) systems.

         - Collect labor market data to inform training and labor market policies.

         - Provide direct TVET training, especially for individuals with low income and unemployment.

         - Establish financial assistance programs for low-income students.

         - Improve the learning environment for TVET education in selected schools.

         - Offer technical assistance (TA) and investments to enhance the overall institutional capacity and policy framework for a sustainable TVET and labor market system.

These efforts are intended to reduce gender inequality in economic opportunities and focus on addressing education and training gaps that contribute to this disparity.

Support more and better jobs by enhancing the enabling environment for business, and increasing digital and physical connectivity for greater innovation, efficiency, and competitiveness.

●      Small and Medium Enterprises (SMEs) play a significant role in the region, accounting for more than 50 percent of employment and GDP. However, their competitiveness is hampered by limited access to financing. The Bank has collaborated with the OECS countries to establish and fund a partial credit guarantee (PCG) scheme. This scheme helps reduce the risks of lending to SMEs by absorbing some of the losses in case of default.

●      Additionally, the Bank is supporting the development of the region's blue economy program. This program will provide matching grants to enhance the productivity, job creation, and capabilities of SMEs operating within the blue economy value chains, such as tourism, fisheries, aquaculture, and waste management. The program will focus on expanding women-owned and managed businesses in the blue economy through the implementation of a regional Micro, Small and Medium Enterprise (MSME) matching grants program. It will also enable women involved in the fisheries sector to access the COAST climate risk fisheries insurance, which safeguards their livelihoods in the event of extreme weather events.

●      The Bank will continue to offer essential knowledge and advisory services with the aim of advancing reforms related to access to finance, which includes aspects like secured transactions, credit bureaus, and insolvency. Additionally, the WBG will work to enhance financial sector regulatory and supervisory frameworks, financial safety nets, non-performing loan (NPL) management, and the overall stability of the financial sector.

●      The Bank will aid in the modernization of policy, legal, and regulatory frameworks, as well as the underlying payment infrastructure, to facilitate innovators in the Eastern Caribbean Currency Union (ECCU) to introduce new non-bank digital payment products and services. This effort will make it easier for merchants, governments, and individuals to regularly use digital payment methods and encourage the expansion of digital financial solutions for Small and Medium Enterprises (SMEs). Key areas of cooperation will include:

         - Updating the Payment Systems Act and Money Services Business Act, along with their corresponding regulations.

         - Developing a regulatory framework for overseeing digital financial services.

         - Designing a regional Instant Payment System (IPS) accessible to banks, non-banks, and ECCU governments to reduce the costs and time involved in payment transfers.

●      Continuing endeavors to enhance the legal and regulatory frameworks for cybersecurity, data protection, and privacy will establish the essential protections required for individuals and businesses to conduct digital transactions securely. To reduce gender inequality, the Bank will actively advocate for women's participation in courses focused on digital skills, broaden access to e-money accounts, and promote women's entrepreneurship through the ongoing Digital Transformation project.

Fostering Conditions for Growth and Competitiveness

●    50 micro, small and medium-sized enterprises (MSMEs) received guaranteed loans under the Micro, Small and Medium-Sized Enterprise Guarantee Facility Project, with all recipients reporting that project activities aligned with their needs and requirements. 

●     39 women-owned or managed businesses received loans as part of the Micro, Small, and Medium-Sized Enterprise Guarantee Facility Project and 137 loan officers trained in MSME credit assessment.

Enhancing Resilience

●      7760 beneficiaries, and over 660 businesses received reimbursable financial assistance during Dominica's reconstruction efforts following the devastation caused by Hurricane Maria, a Category 5 hurricane that struck the island in September 2017 via the Dominica Housing Recovery Project

●      More than 4,000 households - with over 62% of them led by women in St Vincent and the Grenadines - received short-term income support to aid in recovery from the effects of the volcanic eruption and climate-related events through the Volcanic Eruption Emergency Project

Digital Transformation 

As part of the Caribbean Digital Transformation Project (Digital Caribbean) since 2020:

●      81% of Dominicans now have access to the internet, up from 74%

●      78% of Grenadians now have access to the internet, up from less than 70%

●      79% of Saint Lucians and 85% of citizens in St. Vincent and the Grenadines now have internet access.

Human Development and Health

●      Within the OECS Regional Health Project, Dominica, Grenada and St. Vincent and the Grenadines now have improved emergency operations center (EOC) capacities, procedures, and plans in place and, Grenada has enhanced event-based surveillance and a designated laboratory with COVID-19 diagnostic equipment, test kits and reagents.