The economy of the Federation of St. Kitts and Nevis has been systematically destroyed by policies and programs which were not geared to enhancing the productive capacity of the Nation or the development of its human resources. Today, approximately 30 percent of young people are either underemployed or unemployed. The slow death of the economy since 2007 was not a figment of the imagination.
The National debt escalated to EC$3 billion. During the period 2007 to 2012 the Gross Domestic Product per capita continued to decline. The ECCB in its Annual Economic and Financial Report 2012 stated that the annual percentage change in GDP was minus 4.22% in 2009 and minus 0.09% in 2012. This means that the total demand for goods and services in the economy stagnated and resulted in negative economic growth and a decline in social welfare and living standards.
When an economy is in recession, as aggregate demand declines, the demand for labour falls. Young people leaving school and college cannot find jobs. This has been the situation facing our youths for the past seven years. Periodically as it faces a general election, the Labour government offers a carrot to the young people in the form of temporary employment at minimum wages.
Economic growth is only meaningful if wages and salaries are rising faster than any increase in prices, together with an increase in permanent employment. This will raise the living standards. The Prime Minister and Minister of Finance who by his own admission is sole responsible for the inept policies and programs which resulted in this economic dilemma, is now touting the agenda that the Federation is on the road to economic recovery based on a projection by the IMF of a growth rate of 1.9% in 2013.
The IMF prediction is based solely on information provided by this Government. Informed persons are aware that it takes between 2 to 5 years for capital projects to be implemented. Christophe Harbour has been around for 7 years and is still in its infancy. The IMF projected 1.3% growth in 2012. The ECCB concluded that the Federation had a negative growth of 0.9 percent in 2012 compared with a decline of 1.8 percent in 2011. There has never been in the history of St. Kitts and Nevis a more brutal squeeze on real incomes as in recent years with the introduction of VAT (17%) and the hike in electricity rates (85%). The IMF should be more prudent with its predictions especially when dealing with a Prime Minister who is bereft of ideas as how to stimulate the defunct economy which he created.
The proposed recovery is based on increased activity in tourism and construction which declined by 25% in 2011 and the trend continued into 2012 and 2013. Money has a herd instinct and often gravitates to areas of the world offering the greatest return on investment (ROI). Tourism arrivals in the Caribbean, has been on the decline, in recent years. According to the Caribbean Tourism organization (CTO), cruise arrivals in the region are unlikely to rise by more than two to three percent and that onshore cruise visitor expenditure is expected to remain weak.
Economic recovery is weak in the key North American and European markets that feed the Caribbean region. High energy prices are causing cruise lines to choose home ports closer to populous centres, and significant increases in air fares are causing potential visitors to look at destinations closer to home. When most of the other Caribbean countries are suffering double-digit drops in tourist visit, are we to suddenly believe that somehow investors will flock to St. Kitts and Nevis in their numbers, invest in tourism related projects, and bring about this economic resurgence, touted by the Government using the IMF report as a source of reference? This is nothing more than empty rhetoric.
The myth that St. Kitts and Nevis is a HIGH INCOME COUNTRY and therefore its citizens are better off with improved living standards is unrealistic. This is a calculation by the World Bank which is detrimental to the Federation’s ability to access certain funds at preferential rates. The calculation uses Gross National Income (GNI) and not GDP. GNI is GDP at market prices plus incomes from abroad.
It therefore contains SIDF funds and remittances. A high income country is one with a GNI of US$12,466.00 per capita. (In 2012, SKN GDP per capita was US$11,870.00). When assessments are made of a county’s wellbeing either the GDP at basic prices or the Human Development index (HDI) is used. The HDI is a more comprehensive measure since it uses variables such as longevity; literacy; infant mortality and per capita income. In 1995 the Federation, according to the UNESCO report ranked 50 out of 200 countries. In 2012 it ranked 77. This is indicative that poverty levels have risen dramatically since this Government has been in office.
The coming elections should be based on issues such as good governance; transparency; corruption and economic management. The citizens must consider whether they are better off today than five years ago. Has the incumbent government any programs and policies which will move this country forward. The adequacy of the health service is questionable. The quality of education which is currently being offered must be reviewed. That an estimated 57 percent of our students do not graduate with any qualifications or skills is cause for alarm.