The International Monetary Fund (IMF) has commended St. Lucia’s economic recovery, citing strong growth in tourism, construction, and manufacturing.
In its 2024 Article IV consultation, concluded on February 7, 2025, the IMF projected 3.7% GDP growth for the year but cautioned that high debt levels and weak credit growth could pose challenges in the medium term.
St. Lucia’s tourism-dependent economy has rebounded significantly following the pandemic, with visitor arrivals boosting economic activity. The unemployment rate has dropped to a decade low of 14%, though it remains high by regional standards. Authorities have introduced a minimum wage, increased pensions, and are planning an unemployment insurance scheme to support workers.
Inflation, which peaked at 6.4% in 2022, has since plunged to 0.8% in mid-2024, aided by lower energy and utility costs, as well as a VAT reduction. Meanwhile, the current account deficit narrowed to 1.9% of GDP in 2023, reflecting a tourism-led rebound.
However, the fiscal deficit widened to 2.6% of GDP, and public debt climbed to 74.5% of GDP, exceeding the regional 60% threshold. Despite strong liquidity and profitability in the banking sector, credit growth remains weak, while credit unions are expanding rapidly.
ST. Lucia economic outlook and risks
The IMF expects economic growth to slow to 1.5% over the medium term as major infrastructure and hotel projects near completion. Inflation is projected to rise to 2% in line with global cost adjustments.
While the fiscal deficit is set to narrow to 1.3% of GDP in 2024, it could expand to 2.2 – 2.9% in later years due to higher public investment. Debt is forecast to stabilize at 74% of GDP, remaining well above regional targets.
The banking sector faces challenges as high non-performing loans (NPLs), a lack of foreclosure laws, and fiscal uncertainty continue to hamper private sector credit growth.
The IMF cautioned that St. Lucia faces risks from investment delays, high debt rollover needs, and external shocks, including a potential global slowdown and climate-related disasters.
However, the outlook could improve if tourism and construction exceed expectations, providing a much-needed boost to economic growth.
