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Photo: Basseterre, the capital of the Federation of St. Kitts and Nevis (Photo by Erasmus Williams) |
BASSETERRE, ST. KITTS, MAY 27TH 2006 - The Barbados-based Caribbean Development Bank (CDB) is reporting that economic activity in St. Kitts and Nevis continues to improve in 2005.
It is reporting a near five percent growth in the economy driven mainly by the rapid expansion of tourism and related services and a surge in construction. "Economic performance in St. Kitts and Nevis in 2005 improved relative to the previous year, with continued economic growth; a smaller current account balance on the external accounts; and moderate improvement in the fiscal accounts. Real economic growth is estimated at 4.8 percent in 2005 compared to 6.4 percent in 2004," CDB said in its annual report released at the just concluded Board of Governors Meeting in Jamaica.
CDB said economic growth in St. Kitts and Nevis in 2005 was driven mainly by the rapid expansion of tourism and related services as well as the surge in construction activities. "Expansion was recorded in tourism, construction, manufacturing, and transport and communication, wholesale and retail trade, and banking and insurance while the agriculture sector declined in 2005," the CDB reported.
It said that the tourism sector activity in St. Kitts and Nevis increased with strong growth in stay-over visitors, but cruise ship arrivals declined compared with 2004. The agricultural sector declined in 2005 due mainly to adverse weather conditions (unusually heavy rainfall in the latter quarter of 2004 and drought conditions in early 2005).
Sugar cane production was lower in 2005 on account of the adverse weather conditions, the late application of fertilisers and a reduction in the acreage planted. Non-sugar agricultural production (crop and livestock) was also lower despite improved pest control and extension support services.
CDB noted that the sugar industry, which has been in existence in St. Kitts for over 300 years, was closed at the end of July. "In recent years, the sugar industry has accumulated unsustainable losses with annual losses of 3 to 4 percent of GDP and an accumulated debt of over 30 percent of GDP," said the regional financial institution. It noted further that the closure of the sugar industry presents a myriad of challenges as the Government embarks on the process of transition away from sugar production.
According to CDB, the strengthening of economic activity in St. Kitts and Nevis in 2005 occurred within the context of relative price stability, notwithstanding significant increases in petroleum prices in the international market. It said that inflation remained relatively low, averaging 3.6 percent in 2005 compared with 2.3 percent in the previous year. "The domestic price of petroleum products was adjusted twice during 2005. In addition, some adjustments were made to electricity rates in the last quarter. These price increases impacted on the price levels for goods and services and in turn the general price level in SKN," the CDB said.
In its report the CDB pointed out that fiscal performance in St. Kitts and Nevis strengthened further in 2005 on account of strong revenue performance in spite of a rise in expenditures.
"The continuation of administrative improvements at both the Customs and IRDs together with increased economic activity resulted in higher revenue collections in 2005. A small fiscal surplus was achieved in 2005 after many years of fiscal dis-savings. Moreover, the high level of external grants and a marginal decline in capital expenditure and net lending resulted in a significant reduction in the overall deficit in 2005 relative to the previous year," the CDB reported.