The executive board of the International Monetary Fund (IMF) has commended the economy of Dominica, which it says is expanding strongly for the Eastern Caribbean island, but faces headwinds.

This declaration was made following the conclusion of the country’s 2023 Article IV Consultation with the Washington-based multi-national lending agency. Based on the IMF’s assessment, growth is estimated to have rebounded during 2021–22, driven by construction of climate resilient infrastructure, a pickup in tourism following the full lifting of mobility restrictions.

This, is in addition to a substantial rise in agricultural output. The IMF acknowledged that the scarring effects from the pandemic are expected to weigh on growth going forward, while tight fiscal space and volatile Citizenship by Investment (CBI) revenue may constrain much needed public investment, including to deal with frequent and costly climate shocks.

Climate resilient infrastructure driving growth

The IMF declared that real economic growth is estimated to have reached 6.9 per cent in 2021 and 5.7 per cent in 2022, driven by construction of climate resilient infrastructure, a partial rebound in tourism, and a substantial rise in agricultural output.

The fund added that high global commodity prices and shipping costs pushed inflation up to an estimated 7.5 per cent in 2022, despite mitigating fuel price policies.

The current account deficit remained elevated, at 26 per cent of gross domestic product (GDP), due to unfavourable terms of trade, large imports of investment goods, and incomplete recovery in tourism receipts. However, the IMF assessment acknowledged that fiscal space remains tight.

High CBI revenue, nearing a record 30 per cent of GDP in recent years, has supported public investment and crisis response measures. The IMF argued that the economic outlook is positive, predicated on a continued expansion in tourism and implementation of the country’s economic modernization and resilience building agenda.