Inflow of capital to St. Kitts-Nevis reflects confidence

Saturday, December 20, 2003

BASSETERRE, St. Kitts: Preliminary estimates of Gross Domestic Product indicate that St. Kitts and Nevis recorded a 0.8 percent economic growth in 2002, Prime Minister Dr. Denzil Douglas has disclosed.

Prime Minister Douglas, who is also the Minister of Finance, said that while the performance is commendable in the context of the economic malady that has plagued the entire world, and plunged the Caribbean region into state of worry and uncertainty, every effort would be exerted to achieve a growth rate of at least 5% in the upcoming year.

"It must also be noted that the year 2002 was the first calendar year immediately following the September 11 terrorist attack that virtually closed down our tourism plant in months immediately following the crisis and exerted a dampening effect on stay-over tourist arrivals throughout 2002," said Prime Minister Douglas, who noted that when he delivered his Budget Address at the end of 2001, "I indicated that it was quite likely that economy would go into recession in 2002 as a result of the World Trade Centre Crisis."

"Moreover, all the technical advice we received from institutions such as the World Bank, the IMF and Eastern Caribbean Central Bank suggested that our economy would contract and record a negative growth rate in 2002," said Dr. Douglas, who said it was pleasing that the St. Kitts and Nevis economy has demonstrated great resilience and robustness, and has achieved a positive growth rate that far exceeds any of the projections made at the beginning of that year.

"In fact our growth rate of 0.8% for 2002 is four times the average growth rate of 0.3% for the member countries of the Eastern Caribbean Central Bank. I contend that our ability to achieve such outstanding results and to record positive growth rates year after year, during these very difficult times, is a tribute to the resourcefulness of our people and to the efficacy of the macroeconomic policy framework established by my Government," said Prime Minister Douglas as he delivered the 2004 Budget Address in the St. Kitts and Nevis National Assembly on Tuesday.

Dr. Douglas said the strength of the macroeconomic framework is also manifested in his Government's ability to curtail the rate of increase in the cost of living. 

Inflation rate as measured by the change in the consumer price index remained subdued at 2.1% in 2002. Data for the first nine months of 2003 indicate that the inflation rate remained relatively stable at around 2.0%.

According to Prime Minister Douglas, although the St. Kitts and Nevis growth rate of 0.8% is well beyond projections and much higher than the average for the Currency Union, his Government was determined to substantially increase the level of economic activity in the Federation and to increase the growth rate to a level that can provide the revenue necessary to support Government's development programmes, reduce the debt burden and continuously improve the standard of living of the people.

"Even as we exercise fiscal prudence and pursue the fiscal and structural targets agreed to by member countries of the Eastern Caribbean Currency Union, we will be exerting every effort to achieve a growth rate of at least 5 % in the upcoming year," said Prime Minister Douglas, adding: "raising the level of economic growth is a challenge that most Caribbean countries are attempting to confront at this time, and we stand ready to collaborate with other Caribbean countries and with regional and international institutions to ensure that the region as a whole, including our Federation, is well placed to seize every available opportunity to offer competitive goods and services to the rest of the world."

In summarising developments in the Balance of Payments Account, which is a record of all the nation's receipts and payments arising out of transactions with the rest of the world and gives an indication of the extent to which the Country is earning the foreign exchange that is needed to finance imports, implement new development projects and service external debt obligations, Dr. Douglas noted that the external current account was adversely affected by the decline in earnings from the tourism sector as a result of the September 11 terrorist attack and by the need for investors to import large quantities of material and equipment for their various investment projects.

"Hence the external current account deficit widened by 18.1% to reach $340.6 million or 35.3% of GDP," he reported.

Dr. Douglas noted however that notwithstanding the current account deficit, St. Kitts and Nevis was successful in achieving an overall Balance of Payments surplus of $23.3 million or 2.4% of GDP in 2002.

"The 2002 out-turn primarily reflected a 6.1% increase in the surplus on the capital and financial account which amounted to $328.54 million or 34.1% of GDP. Increased official capital inflows and foreign direct equity and portfolio investment were largely responsible for the increased surplus on the capital and financial account," he reported. 

He pointed out that this massive inflow of capital into St. Kitts and Nevis tells the most persuasive story in respect of the confidence that foreign investors place in the economic policies of the St. Kitts-Nevis Labour Administration and in the future prospects of the Federation.

He said the relatively high levels of foreign direct investment reflected in the capital and financial accounts would not have been possible if his Government had not taken the bull by the horns and incurred the debt necessary to build modern infrastructure, pursue human resource development programmes and generally create an investment climate conducive to profitable business operations.

  Back...

  Most popular articles: viewed, printed and e-mailed

  Printable version