Saint Kitts & Nevis - Economy

Although once reliant on sugar monoculture, this industry was closed in 2005. Sugar was once the most important crop in the world. It was used to make molasses and rum, and to sweeten the cuisines of people around the world. And because sugar cane grows in warm, tropical climates, the Caribbean islands were the perfect places to grow it. European settlers from England, France, Spain, and Holland came to the region, cut down the islands' forests, and planted sugar cane.

The islands still carry on small scale production of crops, including rice, yams, bananas and cotton, but its present economy is based primarily on tourism. Saint Kitts and Nevis is an upper-middleincome country. However, the country is vulnerable to external shocks and natural disasters, as evidenced by the effects of the 2008 global economic downturn and the hurricanes that have struck the Caribbean in the past few years. The country’s real gross domestic product (GDP) grew by 4.0% in 2006, 3.1% in 2007, and 4.6% in 2008. However, growth turned negative in 2009 (29.6%) and 2010 (24.2%), largely as a result of the slump in the global economy.

The Federation of St. Christopher and Nevis (St. Kitts and Nevis) is a member of the Organization of Eastern Caribbean States (OECS) and the Eastern Caribbean Currency Union (ECCU). According to the Eastern Caribbean Central Bank (ECCB), St. Kitts and Nevis had an estimated Gross Domestic Product of USD $787.8 million in 2016, with forecast growth of 3.1 percent in 2017. During the last fiscal year, the economy of St. Kitts and Nevis remained buoyant, fueled by revenue from its Citizenship by Investment program, decreased oil prices, a robust construction sector, and increased tourist arrivals. The government remains committed to creating an enhanced business climate to attract more foreign investment.

The country ranked 134th out of 190 countries in the World Bank’s 2017 Doing Business report. The report highlighted no or little change in enforcing contracts, resolving insolvency and trading across borders, but noted some difficulties in the processes for registering property, starting a business, and getting credit.

Saint Kitts and Nevis remains one of the fast growing economies in the Eastern Caribbean, with investment opportunities within the priority sectors as identified under the National Diversification Strategy. These include financial services, tourism, real estate, agriculture, information technology, education services and limited light manufacturing.

St. Kitts and Nevis was the last sugar monoculture in the Eastern Caribbean until the government decided to close the sugar industry in 2005, after decades of losses at the state-run sugar company. To compensate for the loss of the sugar industry, the Government of St. Kitts and Nevis has begun exploring alternative energy uses for sugar cane. The United States and Brazil agreed to develop biofuels programs in the region.

The economy of St. Kitts and Nevis experienced strong growth for most of the 1990s, but hurricanes in 1998 and 1999 and the September 11, 2001 terrorist attacks hurt the tourism-dependent economy. Economic growth picked up in 2004, with a real GDP growth rate of 6.4%, followed by 4.1% growth in 2005. The GDP growth rate rose to 5.8% in 2006, mostly as a result of diversification into tourism and construction related to the Cricket World Cup. Tourism has shown the greatest growth and is now a major foreign exchange earner for St. Kitts and Nevis, as evidenced by an 83% increase in foreign direct investment in a range of tourism-related projects.

Significant investment included a 648-room Marriott hotel and convention center that opened in December 2002, as well as 2007 plans for "Christophe Harbor," a U.S. investor-funded $500 million resort project. The government instituted a program of investment incentives for businesses considering the possibility of locating in St. Kitts or Nevis, encouraging domestic and foreign private investment. Government policies provide liberal tax holidays, duty-free import of equipment and materials, and subsidies for training provided to local personnel.

However, the debt of public enterprises has increased, and total public and publicly guaranteed debt reached $290,740,000 in 2006. Consumer prices have risen marginally over the past few years. The rate of inflation, as measured by the change in the CPI, rose on average by 5.3% in 2006, compared with 3.6% in 2005 and 2.3% in 2004.

St. Kitts and Nevis is a member of the Eastern Caribbean Currency Union (ECCU). The Eastern Caribbean Central Bank (ECCB) issues the Eastern Caribbean dollar (EC$) for all members of the ECCU. The ECCB also manages monetary policy, and regulates and supervises commercial banking activities in its member countries. The ECCB has kept the EC$ pegged at EC$2.7 to U.S. $1.