IMF predicts 4% loss from SKN Budget

BASSETERRE, St. Kitts – AS the global financial crisis continues to expose the vulnerabilities of small island states, the International Monetary Fund (IMF) has forecasted a negative economic growth rate of 1.2% for the 2009 fiscal year, a significant deviation from the budgetary projections put forth by Government.

The loss has already been reflected in economic casualties over the last three months, including a significant fall in tourism expenditure, reduction in remittances and a volatile international financial services sector.  

During his ministerial press conference yesterday (Apr. 8), Minister of Finance Dr. Hon. Timothy Harris informed that, following the IMF’s Article IV Consultations, the nation’s projected 3.2% growth had plummeted to a negative 1.2%. He noted that the drop is due to the negative spinoffs of the economic crisis and the closure of the Four Seasons Resort in Nevis.

Harris added revised prediction is a rare case in which fiscal reality may differ greatly from the projections given in the budget.
“We had a budget passed in 2008, but that is a budget. A budget is really a planned estimate reasonably expected to be followed through. But, as with all expectations, some of them may or may not be realizable. The budget is one thing; the cash reality is another,” Harris said.

Minister Harris noted that the reduction was not only predicted for St. Kitts-Nevis, but also throughout the Eastern Caribbean Currency Union (ECCU).

“With the reduction in remittances and tourism expenditure we have experienced, a tightening of liquidity in the domestic and sub-regional ECCU are expected. The IMF has reported that broad money growth slowed to 2.2% in 2008, down from a growth of 11.2% in 2007, reflecting the slowdown in economic activity since the third quarter of 2008.”

Harris said the current recession calls for the “retargeting and reprioritizing of expenditure”. He maintained that the protection of social safety nets is necessary to safeguard the most vulnerable.

In the last sitting of National Assembly, the Minister of State responsible for Tourism, Hon. Richard Skerritt, pointed to a drop in tourism expenditure for 2009. Harris highlighted that this would likely be reflected in a reduced labour demand in the tourism sector.