WASHINGTON, DC - THE St. Kitts-Nevis Labour Party (SKNLP) administration in Basseterre will have its work cut out as the country is expected to see slow economic growth heading into 2023, resultant of the continued impact of rising inflation.
According to statistics from the International Monetary Fund (IMF), St. Kitts and Nevis is expected to see a significant growth rate of 9.8 percent this year despite the current inflation challenges and supply chain bottlenecks affecting all sectors of the economy.
Growth is being attributed to the uptick in the tourism numbers being recorded.
However, there would be a significant decrease in those numbers - 4.8 percent - next year, according to forecasts by the IMF, as the inflation rate is expected to further cripple the pockets of citizens and residents across all tourism source markets.
The tourism sector is often described as the ‘bread and butter’ of the Federation and any shock would hamper economic growth.
That was evident during the COVID-19 pandemic when the Federation saw negative growth (-14.4%) in 2020 and a further -1.2% last year.
All of that comes against the backdrop of the IMF painting a negative picture for Latin America and the Caribbean in its short term outlook.
The world over has been severely impacted by the rising inflation, and that has prompted governments to implement measures to combat the problem.
It is those measures that will have a trickle down effect across the world, including St. Kitts and Nevis.
The United States, which is one of the source markets, saw a number of measures being taken to combat the rising cost of living.
The United States Federal Reserve, which is the country’s Central Bank, instituted an increase in the interest rates and a further rise is expected, and that can have an economic impact on the the Federation.
While speaking with SKNVibes, Governor of the Eastern Caribbean Central Bank, Timothy Antoine reminded that there is a connection between what is done internationally and locally.
Speaking to the hike in interest rate by the United States, Antoine intimated that the spike could influence the spending habits of citizens and residents and, that in turn, could influence remittances, the appetite for persons to travel and the overall spending needed by the local economy.
“Now it is too early to say that there is going to be an immediate impact on tourism, but if recession is not short term or short lived if it extends for a year or more, you will eventually see it with a lag on our tourism,” Antoine noted during an interview on the sidelines of the 2022 Annual Meeting of the International Monetary Fund and World Bank.
The Capitol Market is another area that will feel the crunch of the current interest rate, but that is expected to taper off when the interest rates are stabilized.
“So, that has direct implications for us! Then there are other things like remittances. The fact of the matter is that we are heavily reliant on remittances in the Caribbean and if people have less disposable income then obviously you will see a reduction,” Antoine added
