by Kevon Browne
St. Kitts and Nevis (WINN) – Growth of St. Kitts and Nevis’s economy is projected at 4.5 per cent in 2023, supported by a strong recovery in tourism and other service sectors, according to the International Monetary Fund.
While there is projected growth, as seen by the COVID-19 pandemic followed by supply chain disruptions and food shortages compounded by the Russia/Ukraine conflict, which contributed to rising fuel, inflation and interest rate hikes, the standard of living cannot compare to pre-COVID-19.
With volatile global headwinds impacting key tourism source markets and commodity prices, how is the Government addressing the possibility that our projected growth may be affected?
“We are seeking to diversify in terms of the economy. We are looking at infrastructure. I’ve spoken about the housing and other major projects that we will bring onstream. I’m talking about also the growth of tourism and expanding in that. We still have the CBI program, we have the financial services sector, which we expect to come back so far, and we are expected to invest in energy and to bring the cost down significantly and to develop that as a sector. We are looking at those ways where we’ll have foreign direct investment, infrastructure, tourism, agriculture, and so forth financial services, to help us rebound here in St. Kitts and Nevis.” – Prime Minister of St. Kitts and Nevis, Hon. Dr Terrance Drew, during an interview with Calistra Farrier on the Narrative.
He continued, “Will it be easy? I would say no. It will be challenging because when you are seeking people to diversify an economy – an economy that can become so dependent on one sector – we had this situation when we used to be dependent on sugar, and we had vowed to never go back to a situation like this because remembered what happened in 2005 when sugar failed and now once again, because of bad management of the economy and the country we are once again put in a position like that. We have to step up to the plate and seek to diversify the economy to strengthen us so that we can become that sustainable Island State that we have said we want to create.”
Projections, while a necessary tool in providing the government, private sector and foreign investors with an idea of the future standing of the economy, external threats could reshape those projections without warning if ignored.
Prime Minister Drew has continually said the government is paying attention to the Russia/Ukraine conflict, inflation and spikes in interest rates.
Governor of the Easter Caribbean Central Bank (ECCB) Timothy Antoine has credited the region’s resilience to the strength of the EC dollar and, due to foreign investment reserves and other financial buffers, to keep the EC dollar strong during the current global economic instability.
However, the Governor acknowledged that financially, the Eastern Caribbean Currency Union should be further along in economic output.
“We should be further along. And the reason why we are not further along, is because of the constant shocks – the boom and busts, the starts and stops – what I call the yo-yo syndrome, which means that you sometimes have a loss decade or loss half-decade when you [are] trying to recover. So look at a simple example. As a result of the pandemic, we probably have lost four or five years of our economic output. Hopefully, we will see us return to pre-pandemic levels in terms of growth – our output levels – by the end of this year next year. But we lost easily four years.”
The strength of the Currency Union could provide some assurance that the region’s projected growth and, more specifically, the Federation’s projected growth could stand.
Premier of Nevis, Hon. Mark Brantley, voiced concern over geopolitical tensions including the Russia/Ukraine war and growing tensions between China and the Republic of China (Taiwan). The foreboding exogenous shocks leave allies wary when thinking about the stability of the Federation and the region.
“The decision taken by President Putin to invade Ukraine is now impacting the people in Eastern Caribbean – higher fuel prices, we can’t process Russians for our CBI, so we now have to scramble and say how are we going to deal with those exogenous shocks to us. COVID-19 eventually arrived in our little Federation in March 2020. And you all remember the trauma, the lockdowns, border closures, certain days for supermarkets, curfews – you remember the trauma. Again a far distant land, Wuhan, China – something happening there that came right here to us in St. Kitts and Nevis. I use these two examples to demonstrate that we are no longer alone in the world. We were never alone, but with technology and travel being as it is now, we are more and more connected. And so it would be foolish of us to think that something that is happening in Taiwan and China will not affect us.”
Exogenous shocks still pose a considerable threat to the region’s financial stability so long as geopolitical tension continues to mount.