Saint Vincent and the Grenadines: Country and Foreign Investment
Economy and Currency
At one time Saint Vincent and the Grenadines was a major sugar producer, but now bananas are the staple of the economy, although tourism has become increasingly important, and the government has been trying hard to build a financial services centre. Tropical storms such as 2004's Hurricane Ivan sometimes cause damage to crops and houses, and tourism in the Eastern Caribbean suffered following 11 September 2001.
The rate of economic growth was, inevitably, influenced by the globala financial crisis and following a strong increase of 8% in 2007, dropped to -0.6% in 2008, -2.3% in 2009, -1.8% was estimated for 2010 and an estimated 0% in 2011. Inflation rose sharply in the first three quarters of 2008, reflecting higher world fuel and food prices, and finished the year at 10.1%. A 0.4% increase was recorded for 2009 and estimates are that the rate for 2010 was 1.2% with forecasts for 2011 putting inflation at 1.9%.
The Unity Labour Party (ULP) government which took office in April 2001 and was re-elected in 2005 implemented an ambitious framework of policy reforms designed to strengthen the public finances, achieve higher growth, lower unemployment and reduction in poverty. The central government’s fiscal position has been strengthening since 2005. In 2008 the fiscal deficit was lowered to 1.7% of GDP and a primary surplus achieved. In 2009 the deficit was 3.6%. Estimates for 2010 put the deficit at 13.4% and forecasts for 2011 expect the deficit to be around 5.5%. Unemployment is high; GDP per head is ECD11,500 (2011 est) at purchasing power parity.
The Offshore Finance Authority was created by Parliament to institute a new system to manage, direct, control and supervise the Offshore Financial Services Industry in Saint Vincent and the Grenadines. However, its role was subsequently assumed by the International Financial Services Authority (IFSA).
The offshore sector grew rapidly in the late 1990s, but action taken by the Government in 2001 and 2002 to improve the regulatory and supervisory framework led to a number of closures of financial institutions.
The local currency is the Eastern Caribbean Dollar (ECD) which is linked to the US$ at an exchange rate of 2.7 ECD to 1 USD. This rate has remained unchanged since 1976.
Monetary matters are regulated by the Eastern Caribbean Central Bank with headquarters in St. Kitts. The ECCB promotes and maintains the monetary stability of the single common currency (the Eastern Caribbean dollar) of the group of eight small island economies, including Anguilla, Antigua and Barbuda, Montserrat, St. Kitts and Nevis, St. Lucia, and Saint Vincent and the Grenadines.
All domestic commercial banks in Saint Vincent and the Grenadines are regulated by the ECCB.