ECONOMIC SNAPSHOT of the Country
The Vanuatu Department of Finance and Treasury has released data on the financial position of the Government for the months of January and February 2021. The Total Net operating Balance of Government operations at the end of February was VT857.4 million which was the equivalent to 0.8% of GDP. The government continues to hold large amounts of Foreign Currency Reserves equivalent to 14 months of Import Cover.
VAT Revenues continue to fall on a year on year comparison
Vat revenues for the month of January which reflect consumer spending in December 2020, has been surprisingly above the same period in 2020. However, in February, there was a large fall in comparison to the previous year. The two months combined totals reflect a 16% drop of VAT revenues from the same period in 2020.
Taxes on International Trade steady
Government Taxes on International Trade In January followed a similar trend to VAT revenues. In January, the amounts collected were 5.75% higher than 2020 but fell in February for a combined drop of 4.6% as compared to the same period.
Passport Sales Decline
Revenues from passport sales declined. For both January and February, revenues from Passport Sales were significantly less than the same period in 2020. The combined total for the first two months of 2021 was 1,620.2million, 32.8% less than the amount collected in 2020 of VT2413 million.
The March 2021 figures have yet to be published. They are expected to reflect a worsening outlook on the state of business conditions and a continuation of the trend that was seen in the fourth Quarter of 2020 when VAT revenues were 43.3% less than the corresponding period in 2019.
The Economic Stimulus
The announcement by the Government of the Economic Stimulus package has been timely in light of the worsening business conditions. The 2021 stimulus package announced was the second stimulus package following the first that was implemented in 2020. The package announced comprised 3 elements.
- A small business Grant until the end of the year to support monthly cashflows of small businesses with turnovers less than 4million per year.
- A Wage Subsidy Scheme for distressed businesses of VT15,000 per month per employee for businesses who can demonstrate that their revenues have fallen 30% as a result of the the COVID-19 crisis.
- A Special COVID-19 Banking facility of 900 million to be allocated to the 5 major banks, providing a guarantee for additional credit to clients that have faced hardship during the pandemic.
Vanuatu has commence vaccinations in May 2021 using the Astra Zeneca Vaccine and the Chinese Sinopham Vaccine. Approximately 7,500 vaccinations to date have been done representing only 2.5% of the total Population. There continues to be some hesitancy in the populace to get the vaccine and the Ministry of Health has embarked on a campaign to convince people to get the shots. It is unlikely for borders to re-open until the population of Vanuatu reaches herd immunity which will likely be well in to 2022 or 2023.