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| St. Kitts and Nevis' Prime Minister and Minister of Finance the Hon. Dr. Denzil L. Douglas |
BASSETERRE, ST. KITTS, FEBRUARY 2ND 2006 - The International Monetary Fund (IMF) said Thursday it is encouraged by the promising outlook for economic growth in St. Kitts and Nevis.
In a Public Information Notice (PIN) posted on its website Thursday, the Washington-based international financial institution said the St. Kitts and Nevis economy has rebounded since 2004, driven by tourism and construction.
The IMF stated that Real GDP growth in St. Kitts and Nevis exceeded 6 percent in 2004, and is projected at almost 5 percent this year.
It stated that the surge in tourism since 2003 was facilitated by favorable global growth and large recent investments in infrastructure. Construction activity also rebounded, with a number of new tourism developments and preparations for the 2007 Cricket World Cup underway.
The IMF noted that while inflation has been well-contained under the currency board arrangement, higher oil prices are worrisome, although the effect has so far been limited to increasing fiscal costs rather than leading to higher inflation or lower growth.
It said that government finances have improved during 2004-05, but the sharp rise in oil prices and prospective investments are constraining further fiscal consolidation.
"Based on the fiscal performance during the first half of 2005, a primary surplus will likely be achieved this year, compared to an average primary deficit of 6.5 percent of GDP over the previous five years," said the IMF.
It pointed out that revenue collection in St. Kitts and Nevis has shown continued strength"owing to the upturn in economic activity and administrative improvements by the Inland Revenue and Customs Departments"but has been mostly offset by increasing current expenditure, in large part reflecting the limited pass-through of higher fuel costs to consumers.
"While a reduction in net lending and nongrant-financed capital expenditure have contributed to the improvement in overall balances, a series of planned investment projects are in the offing. Moreover, the restructuring of the sugar industry will put substantial pressures on the budget for some time to come," the IMF Public Information Notice said.
It expressed concern that despite the strong recovery in economic growth, total public debt has continued to rise and is projected to reach 180 percent of GDP by end-2005.
"While government finances have improved this year, developments in the broader public sector are more worrisome. The debt of public enterprises increased rapidly, reflecting a substantial rise in their capital expenditure combined with inadequate fiscal oversight," the IMF said.
