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This 2006 Article IV Consultation highlights that despite the closure of the sugar industry, economic growth in St. Kitts and Nevis has accelerated. In 2006, the economy is estimated to have recorded its third consecutive year of strong growth, projected at 41⁄2 percent in 2006, with good prospects for 2007. Although the current account deficit remains large, it has been mainly financed by foreign direct investment, and competitiveness appears to be improving. Fiscal imbalances have improved significantly, reflecting both policy adjustments and continued growth.
Delays in investment projects lowered growth to 3.4 percent in 2023 despite a solid rebound in tourism. Revenues from the citizenship by investment (CBI) program were 22 percent of GDP in 2023 which resulted in a small fiscal surplus and debt falling to 54 percent of GDP. Two large energy projects are at a planning stage but, if fully implemented, would shift the country’s energy mix entirely to renewables and significantly reduce the impact of changes in global commodity prices.
This paper elaborates 2014 Article IV Consultation, Seventh and Eight Reviews Under the Stand-By Arrangement (SBA), and Request for Waivers of Applicability and Non-Observance of Performance Criterion for St. Kitts and Nevis. The discussions focus on strategies to secure sustainable growth through enhancing tourism, developing cost-effective energy sources, and improving the business environment. It states that the authorities’ commitment to their program is reflected in the 2014 budget, and their plans to save the bulk of the Citizenship by Investment (CBI) application fees.
This 2015 Article IV Consultation highlights that the economic situation of St. Kitts and Nevis has continued to improve since the completion of the IMF-supported home-grown economic program in July 2014. Continued rapid inflows under the Citizenship-By Investment program have led to a surge in construction activity, and supported a large increase in government and Sugar Industry Diversification Fund investments and spending, including on the People Employment Program. These factors, together with the ongoing recovery in tourist arrivals fueled rapid GDP growth of about 6 percent in 2013 and 2014. The near-term outlook remains strong, but there are risks on the horizon.
This 2017 Article IV Consultation highlights that the economic performance of St. Kitts and Nevis moderated in 2016. Growth moderated, reflecting the deceleration in tourism-linked sectors and contraction in manufacturing output, while still exceeding the average growth in the Eastern Caribbean Currency Union region. Consumer inflation was negative, reflecting the favorable tax environment and low international fuel prices, but end-year inflation turned positive as these effects started to subside. Growth is expected to average at about 3 percent in the medium term. Inflation is projected to rise with the expected rise in fuel prices, remaining about 2 percent in the medium term.
Growth decelerated marginally in 2017, as the continued decline in CBI inflows slowed growth in construction. Consumer inflation was low, partly due to a small contraction in food prices. The overall fiscal balance remained in surplus but has deteriorated markedly since its 2013- peak, and the debt-to-GDP ratio increased marginally from the previous year. The current account deficit remains high and only marginally declined in 2017, as the decline in CBI receipts was more than offset by growing tourism receipts and a significant decrease in imports. Foreign reserves at the ECCB remained at comfortable levels, well above the various reserve-adequacy metrics. The banking sector has reported capital and liquidity ratios that are well above the regulatory minimum but has elevated NPLs and risks, including delays in completing the debt-land swap arrangement and loss of Corresponding Banking Relationships (CBRs).
This 2016 Article IV Consultation highlights that economy of St. Kitts and Nevis continued its strong growth at about 5 percent, recording the strongest growth in the region during 2013–15. Strong growth has been underpinned by construction and tourism sector activity and their favorable spillovers on the rest of the economy, supported by surging inflows from its Citizenship-by-Investment (CBI) program. Large CBI inflows continued in 2015, albeit at a slower pace. The medium-term outlook is positive, but remains dependent on developments in CBI inflows. Growth is expected to moderate to 3.5 percent in 2016 and 3 percent, on average, over the medium term.
Economic growth rebounded strongly in 2022 despite global headwinds. GDP is estimated to have grown by 9 percent in 2022 after contracting 14.5 percent in 2020 and 0.9 percent in 2021. The lifting of all COVID-related travel restrictions in August sparked a strong rebound in the tourism sector and across the economy. Yet economic activity is not back to pre-pandemic levels. Inflation picked up, increasing from 1.9 percent in 2021 to 3.8 percent in 2022, reaching the highest level in a decade. The authorities’ proactive policy response, facilitated by the fiscal buffers accumulated from a decade of prudent fiscal policy, helped shelter domestic prices from high global energy and food prices. These measures nonetheless took a heavy toll on fiscal accounts in 2022. The primary balance ex-CBI revenue and land buybacks, an indicator of the underlying fiscal stance, deteriorated to a deficit of 17 percent of GDP (vs. 15 percent in 2021). Large CBI inflows in 2022 helped finance this expansion, keeping public debt below the ECCU regional target of 60 percent of GDP. The current account deficit is estimated to have narrowed in 2022, supported by tourism recovery.