News from our Region
Vulnerability of Small Statesunderscored at Economic Development Meeting
St. Kitts and Nevis has underscored thevulnerability of small states to external shocks and crises broughton by several events including the slowing down of the world'srate of growth, the increased pace of globalisation and tradeliberalisation, dwindling aid flows and the September 11th terroristattacks on the United States.Prime Minister and Minister of Finance,Dr. the Hon. Denzil L. Douglas delivering his Country's Presentationat the just concluded Caribbean Group for Cooperation in EconomicDevelopment (CGCED), noted that St. Kitts and Nevis is a smallopen economy characterised by a limited natural resource base,the predominance of imports in total trade, a high per capitacost of providing infrastructure, narrow domestic markets anddependence on a few products for export to a few markets.
Dr. Douglas said St. Kitts and Nevis looksto the OECS as an important instrument for fostering greater collaborationand co-ordination of economic policies and for promoting economicdiversification across countries with a view towards reducingthe risk faced by the sub-region as a whole and by each of theindividual countries.
"The risks faced by St. Kitts and Nevishave been exacerbated by the continued decline of the sugar industryand the resulting accumulation of huge losses and huge debts inthe industry, the need to effect rehabilitation and reconstructionwork in the wake of a spate of destructive hurricanes between1995 and 1999, the need to arrest the threat of poverty and thedifficult fiscal situation that has been worsened by large revenuelosses following the September 11 crisis," said Prime MinisterDouglas.
Stating that the problems faced in recentyears are clearly indicated by the level of economic activityin the twin-island Federation, Prime Minister Douglas pointedout that economic in St. Kitts and Nevis over the period 1997- 2001 averaged 3.9 percent compared to 4.7 percent for the previousfive year period, 1992 - 1996 and 6 percent in 1987 to 1991.
Dr. Douglas said it is estimated that theSeptember 11th crisis trimmed some 2.5 percent from the growthrate of St. Kitts and Nevis. A 2 percent growth rate was recordedin 2001, according to the Barbados-based Caribbean DevelopmentBank.
The deceleration in growth in the latterhalf of the nineties was influenced by the global economic slowdownand by the passage of hurricanes which inflicted severe damageon the tourism and agricultural sectors and the pattern of growthexhibited over the last five years was significantly influencedby the post-hurricane rehabilitation and reconstruction activities.While construction was one of the lead sectors in terms of contributionto economic growth, the tourism and agricultural sectors recordedrelatively poor performances.
"Moreover, much of this constructionwas initiated by the Government because we were determined toease the burden faced by vulnerable groups in our society, ensurespeedy return to normalcy and minimise the long-run structuralimpact of the hurricanes. Hence the Government sector was themajor contributor to economic growth in the post hurricane years,"said Prime Minister Douglas.
He added that this resulted in substantiallyincreased levels of debt, much of it contracted on commercialterms because of St. Kitts and Nevis' "premature graduationfrom the soft resources of the international financial institutionsand dwindling aid flows."
Dr. Douglas said that in light of the numerouschallenges faced, his Government recognises the importance oftaking urgent action to stabilise and restructure the economyto adapt to the changing global economic environment, to reducemacroeconomic vulnerability and to set the stage for sustainedgrowth and development over the medium-term.
The St. Kitts and Nevis leader said althoughthe outlook for 2002 suggests that growth will be minimal, "weexpect that the implementation of our fiscal consolidation programme,the strengthening of debt management operations, along with othermeasures aimed at improving the investment climate and enhancingcompetitiveness, will ensure the achievement of fiscal and debtsustainability as well as increased levels of economic growthover the medium-term.