(2022-S1) Èspektiv Makroekonomik ak Povwte - Ayiti

HAITI Table 1 2021 Population, million 11.5 GDP, current US$ billion 20.9 GDP per capita, current US$ 1814.6 International poverty rate ($1.9) a 24.5 Lower middle-income poverty rate ($3.2) a 50.3 Upper middle-income poverty rate ($5.5) a 78.6 Gini index a 41.1 Life expectancy at birth, years b 64.0 Total GHG Emissions (mtCO2e) 10.5 Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2012), 2011 PPPs. b/ Most recent WDI value (2019). Haiti’s economy contracted for a third consecutive year in 2021, increasing the already high poverty levels. This reflects the deep structural challenges the country must surmount, including a deepening lingering political crisis, unprecedented level of insecurity, and weak governance, which, combined with relatively low skilled labor, leads to a strong dependence on imports. The country is also highly vulnerable to natural hazard shocks and is recovering from a devastating earth- quake and tropical storm Grace in the Southern peninsula in 2021. Key conditions and challenges The political and institutional crisis, com- pounded by increasing levels of insecuri- ty, continues to hinder Haiti’s economic performance. Other key challenges to boost productivity and economic growth include deficient infrastructure, limited human capital, weak governance and in- stitutions, and an unfavorable business environment characterized by uncertain- ty, under-developed finance markets, and limitedmarketcontestability. Vulnerability to natural hazard shocks and climate change is likely to continue to hinder growth, hurting the poor and thevulnerable. The lack of credibility in the policy frame- work and uncertainty of the political process erodes confidence and impair eco- nomic agents' ability to plan for the long term or create jobs. Moreover, limited ac- cess to quality healthcare and education hinders the possibility of building human capital to break the cycle of poverty. Recent developments Political instability and security concerns due to armed gangs vying for control over business districts depressed investment which contracted by 21.8 percent in 2021, taking a toll on economic activity. There- fore, GDP contracted by 1.8 percent in 2021, marking the third consecutive year of negative growth. All three sectors of the economy declined, with agriculture regis- tering the largest slide at 4.1 percent, partly as a result of watershed degradation and low rainfall. The economic slump affected households, with 68 percent of them re- porting income drop compared to the pre- pandemic period (HFS). On the fiscal front, the government strug- gled to mobilize tax revenues. The fiscal deficit is estimated at 2.5 percent of GDP in 2021, with direct subsidies to the energy sector accounting for 1.3 percent of GDP. In Q1 FY2022, however, the government partially removed oil subsidies, hiking re- tail fuel prices by 74.3 percent on average. Due to the strong gourde policy engi- neered at the beginning of FY2021, the cur- rency appreciated by 23.2 percent on av- erage against the US dollar by the end of FY2021. Headline inflation consequently edged down to 15.9 percent and food in- flation declined to 19.6 percent, from 27.5 percent the previous year. The poorest are disproportionally affected by the high in- flation levels given their high share of household expenditures on food. In line with the reduced household incomes and high inflation levels, food insecurity has worsened, especially in the poorest rural households, where 80 percent reported running out of food. But the incidence of COVID-19 remained relatively mild, de- spite a vaccination rate below 1.0 percent. By the end of February 2022, about 26,000 positive cases had been officially reported. A corollary of the strong gourde policy is the depletion of net international reserves, which declined by 35.8 percent to stand FIGURE 1Haiti/RealGDPgrowthandsectoralcontributions torealGDPgrowth -3 -2 -1 0 1 2 3 4 2001-20052006-20102011-20152016-20202021 AgricultureIndustry ServicesGDP Percent, percentage points Source: Haiti Statistical Office (IHSI). FIGURE 2Haiti/ Actual and simulated poverty rates and real GDP per capita 48000 50000 52000 54000 56000 58000 60000 0 10 20 30 40 50 60 70 80 90 2012201420162018202020222024 International poverty rate Lower middle-income pov. rate Upper middle-income pov. rate Real GDP pc Real GDP per capita (constant LCU)Poverty rate (%) Source: World Bank staff calculations. 1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized at US$ 457.6 million in FY2021. Gross re- serves are, however, at a healthy level of 6.5 months of imports. The current account balance (CAB) remained positive at 0.7 percent of GDP, on large remittances in- flows increase, higher exports, and the col- lapse in investment. Despite a recent political agreement to form a new interim government, the polit- ical situation remains volatile. The govern- ment’s most urgent task is to reestablish security and organize credible elections. Outlook The tense political context and heightened security concerns continue to depress pri- vate investment, with attendant conse- quences on growth. GDP is therefore ex- pected to contract by 0.4 percent. Agricul- ture, on which most vulnerable and poor households depend for their livelihood, will continue to hamper growth; one reason for this is the constant reduction of arable land and low credit to the sector (0.1 percent of totalcommercialloansinFY2021). While the recent fuel price adjustment provided temporary relief, given the on- going Russia-Ukraine war, ensuring retail prices are adjusted regularly to reflect in- ternational market price conditions for all fuel products will be needed. Fiscal con- ditions will remain tight since the author- ities stated their intentions to commit to fiscal consolidation within the IMF Staff Monitored Program (SMP) framework. Hence, the fiscal deficit is expected to nar- row to 1.5 percent of GDP, albeit 1.9 per- cent of GDP of central bank (BRH) financ- ing is anticipated. The fuel price increase, coupled with declining agricultural out- put and BRH financing, will exert pres- sure on CPI inflation, which is expected to close at around 26.2 percent, with the exchange rate moving pari passu. The re- sulting increase in the cost of basic goods wouldhurtthepoorest. Imports will grow at a faster rate, on higher fuel and food prices and material to meet post-earthquake reconstruction needs. However, the workers’ strike at the beginning of FY2022 in the textile sector, coupled with rising insecurity, will affect the sector’s output. Therefore, exports are expected to contract. Despite the global economic recovery and ensu- ing increasing remittances, the CAB will turn to a deficit of around 1.3 percent of GDPinFY2022. The economy is expected to rebound in the medium term, supported by strong remit- tances and increased private investment as political tensions ease, and the security sit- uation improves. GDP is expected to ex- pand by 1.7 percent over the medium term. Donor support and finalization of the SMP with the IMF, with several structural mea- sures focusing on tax revenue mobilization and greater spending efficiency, will likely help maintain the fiscal deficit at manage- able levels over the medium term, easing pressure on prices. The CAB is expected to stabilize at around -2.0 percent of GDP, on stronger growth of remittances. The outlook remains fraught and hinges strongly on how the political context evolves and security improves. Delay in im- plementing critical reforms, including in the electricity sector, customs, and internal revenue service, and vulnerability to natur- al hazard shocks may also hinder growth andachievementofsharedprosperity. TABLE 2Haiti/ Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2018/19 2019/20 2020/212021/22e2022/23f2023/24f Real GDP growth, at constant market prices -1.7 -3.3 -1.8 -0.4 1.4 2.0 Private Consumption -1.0 -4.0 1.2 1.0 1.8 0.9 Government Consumption -8.6 11.1 9.7 9.5 8.1 -2.1 Gross Fixed Capital Investment 7.7 -20.6 -21.8 -0.8 -7.3 23.5 Exports, Goods and Services 6.8 -39.7 1.4 -1.0 4.0 2.0 Imports, Goods and Services 4.2 -18.3 2.7 6.2 2.5 3.1 Real GDP growth, at constant factor prices -1.1 -2.9 -2.5 -0.1 1.4 2.0 Agriculture -1.9 -2.5 -4.1 -1.1 0.9 1.0 Industry -6.8 -6.9 -2.5 -1.5 1.7 1.5 Services 2.1 -1.2 -2.0 0.9 1.4 2.6 Inflation (Consumer Price Index) 17.3 22.9 15.9 26.2 18.9 13.4 Current Account Balance (% of GDP) -1.1 1.5 0.7 -1.3 -2.1 -1.5 Net Foreign Direct Investment (% of GDP) 0.5 0.2 0.2 0.4 0.4 0.3 Fiscal Balance (% of GDP) -2.0 -3.0 -2.5 -1.5 -1.7 -1.5 Debt (% of GDP) 26.2 24.4 25.6 26.1 21.8 23.2 Primary Balance (% of GDP) -1.7 -2.7 -2.2 -1.2 -1.4 -1.3 International poverty rate ($1.9 in 2011 PPP) a,b 23.5 25.1 26.0 26.5 26.5 26.2 Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b 48.3 51.0 52.3 52.9 52.8 52.5 Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b 77.6 79.0 80.0 80.6 80.5 80.1 GHG emissions growth (mtCO2e) -0.6 -0.7 0.4 0.4 1.9 2.5 Energy related GHG emissions (% of total) 33.3 32.4 32.2 32.4 33.6 35.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. a/ Calculations based on SEDLAC harmonization, using 2012-ECVMAS.Actual data: 2012. Nowcast: 2013-2021. Forecasts are from 2022 to 2024. b/ Projection using neutral distribution (2012) with pass-through = 0.87 based on GDP per capita in constant LCU. 2