Financial Crime World

Haiti’s Economic Outlook: Tainted by Instability and Insecurity

A Nation on the Brink of Crisis

Haiti, a country already vulnerable to natural disasters, low development levels, and widespread inequalities, is facing an uncertain economic future. The assassination of President Jovenel Moise in 2021 has plunged the nation into a political crisis that continues to affect its economy.

Factors Contributing to Economic Instability

  • Political Crisis: Questions surrounding the legitimacy of interim Prime Minister Ariel Henry have grown, exacerbating instability.
  • Rising Inflation and Social Unrest: Stifled economic growth has led to increased inflation and social unrest.
  • Security Situation: The fragile security climate is expected to continue, making it difficult for the private sector to invest and contribute to the economy.

Economic Challenges Ahead

  • Decline in Remittances: A decline in remittances from Haitian expatriates in the US and Canada is expected due to slower economic activity in North America.
  • Growing Current Account Deficit: The reduction in remittances will exacerbate the country’s current account deficit, which is expected to grow in 2023.
  • Fiscal Policy Constraints: The government’s fiscal policy will continue to be dictated by low tax mobilisation and financing constraints.

Government Response

  • Tax Reforms: Efforts aimed at broadening the tax base and economic growth are expected to increase revenues.
  • Social Expenditure: Social expenditure is likely to rise, with a reduction in subsidies for petroleum products from autumn 2022 freeing up fiscal space for social spending.

External Support

  • Central Bank of Haiti: The Central Bank will continue to rely on inflation-generating monetisation to finance the deficit.
  • External Grants: Bilateral and multilateral partners’ external grants will play a crucial role in deficit financing.

Conclusion

Haiti’s economic outlook remains fragile, with a high risk of instability and insecurity affecting its development prospects. The country will require sustained international support and commitment from its leaders to address these challenges and build a more stable economic future.