Saint Kitts: Country and Foreign Investment
Economy and Currency
Sugar was the traditional mainstay of the Saint Kitts economy until the 1970s when activities such as tourism, export-oriented manufacturing, and offshore banking began to assume larger roles in the economy. As tourism revenues are now the chief source of the islands' foreign exchange, a decline in stopover tourist arrivals following the September 11, 2001 terrorist attacks eroded government finances. In 2009 and 2010, following the global financial crisis, tourism declined significantly and with it tourism-related construction and foreign direct investment.
Despite the closure of the sugar industry, economic growth accelerated in 2006, fiscal imbalances improved significantly and monetary aggregates continued to grow in line with economic growth, according to the IMF.
In June 2009, the IMF said that after several years of robust growth, the economy of Saint Kitts and Nevis had weakened markedly. Still, the IMF believes that, while the global downturn and heavy debt burden are likely to weigh heavily on near-term growth, the economy is well placed to achieve strong growth over the medium term provided that appropriate policies and reforms are implemented. The IMF said that after growing by 3.2% in 2008, Saint Kitts and Nevis’s real output was projected to contract by 1.2% in 2009. In the event, GDP slumped to -9.6%. Higher food and fuel prices led to a pick-up in inflation in the first ten months of 2008, peaking in October 2008 at 8.3% before moderating to 7.6% at the end of 2008. Inflation eased further in 2009 on the back of lower oil prices, a rise to 2.5% was recorded for 2010 and 2011 is estimated to see inflation rise to 3.5%.
GDP per capita at purchasing power parity is USD13,700 (2010 est), on the low side for the region. Agriculture represents just 2.6% of the economy, with industry contributing 25.3% and services 72.1%. Tourism revenues are now the chief source of the islands' foreign exchange. Each islands boasts a championship golf course and additional tourist facilities, including a second cruise ship pier, hotels are under construction.
The current account deficit widened to 9.4% compared to 3.8% in 2009 due to a reduction in tourism and FDI-related construction. Oil imports from Venezuela contributed to arrears faced by the jurisdiction.
With a debt ratio of almost 200% of GDP by end-2010, the government announced in June, 2011 that it plans to restructure its debt with the help of its creditors.
The Federation's currency is the East Caribbean dollar, pegged at 2.7 to the US dollar. The currency is controlled by the Central Caribbean Reserve Bank, situated in Saint Kitts. However, the US Dollar is generally considered to be a second currency and is freely accepted and interchangeable throughout the Island.