(2023-S2) Èspektiv Makroekonomik ak Povwte - Ayiti

HAITI Table 1 2022 Population, million 11.6 GDP, current US$ billion 20.2 GDP per capita, current US$ 1745.9 International poverty rate ($2.15) a 29.2 Lower middle-income poverty rate ($3.65) a 58.0 Upper middle-income poverty rate ($6.85) a 85.8 Gini index a 41.1 Life expectancy at birth, years b 63.2 Total GHG emissions (mtCO2e) 11.2 Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2012), 2017 PPPs. b/ Most recent WDI value (2021). The political crisis coupled with gang vio- lence continues to negatively impact eco- nomic activity, with output declining in H1 FY23, hindering poverty reduction. Inflation remained high but is decelerat- ing thanks to monetary policy tightening. Despite challenging conditions for the ex- port-oriented textile sector, higher remit- tances inflow and a slowing of imports amid collapsing investment resulted in a current account surplus, easing external financing needs. Key conditions and challenges Haiti’s economic performance continues to be hampered by political crisis and gang violence. Vulnerable to natural haz- ard shocks and with weak disaster risk management and response systems, Haiti is ill-suited to cope with the effects of climate change. Already limited human capital and institutional capability are be- ing depleted by insecurity from gang warfare that has emerged as the binding constraint to growth. Violent gangs sprang up from poor neighborhoods due partly to limited public investment in ed- ucation combined with a weak business environment that limited job opportuni- tiesforyouth. Headline inflation is trending down but food inflation remains high, impacting poor households the hardest. In line with a widening output gap, core inflation is declining after having peaked in Janu- ary from second-round pass-through ef- fects of retail fuel price adjustments in Q1 FY23. Keeping inflation on a down- ward trend will require addressing fiscal pressures from chronically low tax rev- enuecollection. Recent developments Output decline continued as the in- dex of economic activity contracted by 2.9percent in H1 FY23, amid insecuri- ty from gang violence and continued un- certainty around the political process. On the supply side, all sectors contributed to the economic decline. Agriculture, which engages over 40 percent of the labor force, registered the largest decline (-5.0 percent). This has likely increased pover- ty and food insecurity because most poor households derive their livelihoods in that sector. Therefore, increasing agricul- tural productivity remains a key policy priority to promote inclusive growth and improveequity. The textile sector, the largest formal pri- vate sector employer, shed more than 20,000 jobs (roughly one-third of the to- tal) since the beginning of the fiscal year, due to insecurity. In the current context of limited economic opportuni- ties, these layoffs are likely to push a large share of these workers and their familiesintopoverty. Construction, production of electricity and water, all three harbingers of fu- ture growth, continue their decline. Services contracted by 2.6 percent, led byhospitality. Tax revenue collection improved by 59.8 percent at the end of June 2023, thanks to tighter control at the customs administra- tion and higher oil tax revenue. Tax to GDP remains weak, however, owing to the eco- nomic slump and governance issues at the customs and tax administrations. Nonetheless, energy subsidy cuts and re- trenchment of capital spending helped im- prove the fiscal position, lowering financ- ing needs and supporting fiscal consolida- tion efforts. This provided room for the FIGURE 1Haiti/ Sectoral growth rates, y/y, Q2 FY23 -20-15-10-50510 ICAE Agriculture Mining and quarrying Manufacturing Construction Electricity and Water Commerce Hotel and restaurants Transport and communication Financial institutions Other market services Non-market services Tertiary = -2.6Secondary = -2.3Primary = -5.1ICAE = -2.9 Percent change Source: Haiti Statistical Office (IHSI). FIGURE 2Haiti/ Actual and projected poverty rates and real GDP per capita 44000 46000 48000 50000 52000 54000 56000 58000 60000 62000 0 10 20 30 40 50 60 70 80 90 100 2012201420162018202020222024 International poverty rate Lower middle-income pov. rate Upper middle-income pov. rateReal GDP pc Real GDP per capita (constant LCU)Poverty rate (%) Source: World Bank. Notes: see Table 2. 34 central bank to anchor its price stability ob- jective, through a 74 percent reduction y- o-y of monetary financing of the deficit at the end of June, helping to decelerate in- flation, which peaked at 49.3 percent y-o-y in January from the effect of fuel subsidy adjustment in December to 39.7 percent in July. Although on a downward trend, in- flation remains high, especially food infla- tion (46.1 percent on average over the pe- riod compared to 27.7 percent last year). The drivers of high inflation are continued monetization of fiscal deficit, low agricul- tural productivity, and gang warfare im- peding the seamless movement of goods from production sites to markets, with at- tendant consequences on the poor and vul- nerable households. As of June 2023, 49 percent of Haiti’s population was estimat- ed to be acutely food insecure. The ex- change rate appreciated by 0.1 percent over the period, compared to a 1.7 percent depreciation in the previous period. In the external sector, exports declined by 20 per- cent, principally due to textile sector per- formance. Imports edged down just 1 per- cent over the same period pushed up by higher fuel and food import bills. Remit- tances advanced by 8 percent, boosted by favorable economic prospects in the USA, where upward of 70 percent of remittances to Haiti originate. Outlook Private investment will continue to de- cline amid security concerns while per- sistent higher prices will dampen private consumption, despite social protection programs being implemented. GDP is ex- pected to contract by 2.5 percent in FY23. In the baseline, growth is expected to firm up into positive territory with a re- bound of 1.3 percent in 2024, assuming stabilization of the political context and improvements in security. However, with real GDP per capita growth of just 0.1 percent expected for 2024, the poverty rate (US$3.65 per day, 2017 PPP) will re- mainat63.2percent. With the decline in energy subsidies and the resulting emerging fiscal space, the fis- cal deficit is expected to narrow to 2.0 per- cent of GDP in FY23. Fiscal consolidation efforts are expected to continue over the medium term on revenue hikes, bringing the fiscal deficit below the 2.0 percent of GDP mark. Sustained high fuel prices, low agricultural productivity, and the closing of the border between Haiti and the Dominican Repub- lic will exert further price pressures, with inflation expected to close the fiscal year above 40 percent on average. The ensuing erosion of household purchasing power and the continuing economic slump are ex- pected to exacerbate poverty and food in- security. The effects of lower imports plus higher remittances will offset the expected drop in exports, leading to a current ac- count surplus of 1.0 percent of GDP. Over the medium term, as investment picks up, the current account is expected to register a deficit above 2.0 percent of GDP. With growing security concerns and a deterio- rating business environment, FDI inflow currently at 0.1 percent of GDP is expected to remain well below the CAD. Besides boosting exports or cutting down non-es- sential imports, Haiti’s other CAD financ- ing option is the continuous depletion of forex reserves, which could precipitate de- preciation of the currency and fuel infla- tion, with further aggravating conse- quences for the poor. Effective management of inflation through balanced macroeconomic inter- ventions will remain key for macroeco- nomic stability and growth prospects. Re- ducing disaster risks through strengthen- ing the institutional framework and re- sponse system remains essential for inclu- sive growth. A slower-than-expected im- provement in the security situation is a significantdownsiderisk. TABLE 2Haiti/ Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019/20 2020/21 2021/22 2022/23e 2023/24f 2024/25f Real GDP growth, at constant market prices -3.3 -1.8 -1.7 -2.5 1.3 2.2 Private consumption -4.0 1.2 -0.7 -1.6 0.7 0.6 Government consumption 11.1 9.7 21.7 18.8 8.2 15.2 Gross fixed capital investment -20.6 -21.8 -13.8 -42.5 10.4 14.8 Exports, goods and services -39.7 1.4 2.4 -2.6 2.8 2.1 Imports, goods and services -18.3 2.7 4.9 -2.7 4.0 5.5 Real GDP growth, at constant factor prices -2.9 -2.5 -2.1 -2.6 1.3 2.1 Agriculture -2.5 -4.1 -4.5 -4.1 2.0 2.0 Industry -6.9 -2.5 -0.4 -1.1 1.5 1.5 Services -1.2 -2.0 -2.1 -2.8 1.0 2.5 Inflation (consumer price index) 22.9 15.9 27.6 44.2 26.0 22.6 Current account balance (% of GDP) 1.1 0.5 -2.5 0.8 -2.5 -3.2 Net foreign direct investment inflow (% of GDP) 0.2 0.2 0.2 0.1 0.3 0.3 Fiscal balance (% of GDP) -3.0 -2.5 -3.2 -2.2 -2.3 -1.4 Revenues (% of GDP) 7.5 6.9 6.6 7.7 7.9 7.7 Debt (% of GDP) 23.5 28.4 27.6 29.2 29.8 26.6 Primary balance (% of GDP) -2.7 -2.2 -2.9 -1.9 -2.0 -1.1 International poverty rate ($2.15 in 2017 PPP) a,b 29.9 31.3 32.3 34.3 34.3 34.0 Lower middle-income poverty rate ($3.65 in 2017 PPP) a,b 58.9 60.1 61.6 63.2 63.2 62.6 Upper middle-income poverty rate ($6.85 in 2017 PPP) a,b 86.4 87.5 88.0 88.7 88.7 88.4 GHG emissions growth (mtCO2e) -0.8 1.2 0.5 -0.4 1.6 1.0 Energy related GHG emissions (% of total) 35.5 35.5 35.0 33.8 34.1 34.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2012-ECVMAS. Actual data: 2012. Nowcast: 2013-2022. Forecasts are from 2023 to 2025. b/ Projection using neutral distribution (2012) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. 35