SAINT LUCIA ECONOMIC REVIEW 2004 Presented to Parliament by The Minister of Finance, International Financial Services & Economic Affairs on April 19, 2005 Prepared by The Division of Economic Affairs Ministry of Finance, International Financial Services & Economic Affairs NOTE/ACKNOWLEDGMENT he data contained in this Review have been arranged and classified to facilitate economic analysis, and may therefore not coincide exactly Twith the accounting systems from which they may have been derived. In addition, the figures for the year under review, and in some cases for previous years, are preliminary. The Government of Saint Lucia wishes to thank for their kind cooperation, all the individuals and institutions in both the public and private sectors (whether in Saint Lucia or abroad), who have supplied data or other information for this Review. COPYRIGHT 2005- Ministry of Finance, International Financial Services and Economic Affairs All rights reserved. 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SAINT LUCIA - DATA SHEET Area (Square ml).......................... 238.0 (Square km)......................... 616.0 Habitable Area (square ml).......................... 207.9 (Square km) ....................... 539.1 (Preliminary) Change POPULATION AND DEMOGRAPHY 2003 2004 (03-04) Population ....... 160,620 162,311 1.05% Population Density1 - Per sq. ml ....... 772.6 780.7 1.05% - Per sq km ....... 297.9 301.1 1.07% Birth Rate (per 1000) ....... 14.7 15.3 4.08% Death Rate (per 1000) ...... 6.5 6.2 -4.6% Infant Mortality Rate ...... 15.6 14.7 -5.8% AY02/03 AY03/04 EDUCATION2 ....... 27,175 25,673 -5.5% Primary School Student Enrollment ....... 12,655 12,931 2.2% Secondary School Student Enrollment ....... 2,177 3,298 51.5% Tertiary School Student Enrollment FY 03/04 FY04/05 CENTRAL GOVERNMENT FISCAL OPERATIONS3 Total Revenue & Grants ....... 533.03 552.9 3.7% Current Revenue ........ 491.5 552.0 12.3% Total Expenditure ....... 610.8 646.0 5.8% Current Expenditure ....... 474.7 482.7 1.7% Capital Expenditure ....... 136.1 163.4 20.0% Current Balance ....... 16.8 69.4 Overall Balance ....... -77.8 -93.2 PRICES Inflation Rate ........ 1.0% 1.4% DEBT ($M) Public Debt ....... 1,232.7 1,437.8 16.6% External Debt ....... 911.7 965.2 5.8% DEBT RATIOS CG Debt Service/Current Revenue ....... 25.1% 19.8% Public Debt/GDP ....... 63.8% 69.6% External Debt Outstanding to GDP ....... 47.2%- 46.7% External Debt Service/Exports ....... 7.0% 8.0% 1 The population density is equal to the population divided by the habitable area. 2 Figures relate to academic years 2002/03 and 2003/04. 3 Figures relate to fiscal years 2003/04 and 2004/05. SAINT LUCIA - DATA SHEET (Preliminary) Change GDP at Factor Cost 2003 2004 (03-04) - Constant Prices ($m) ....... 1,215.2 1,259.4 3.6% of which: - Agriculture ....... 53.9 56.7 5.1% - Tourism ....... 161.4 170.9 5.9% Rate of Growth ....... 2.9% 3.6% MONEY AND CREDIT ($m) Total Deposits ....... 2022.4 2,239.4 10.7% Money Supply (M1) ....... 343.1 481.3 40.3% Money Supply (M2) ....... 1,370.4 1,514.6 10.5% Bank Credit to Public Sector ....... 131.0 178.1 35.9% Bank Credit to Private Sector ....... 1,498.2 1,650.1 10.1% Bank Credit by Sector: ....... 34.5 33.4 -3.1% Agriculture ........ 54.2 106.9 97.1% Manufacturing, mining and quarrying ....... 117.6 142.2 19.2% Tourism ....... 197.8 202.2 2.2% Distributive Trades ....... 799.9 860.3 7.5% Personal ....... 23.0 23.7 3.2% Transport ....... 22.3 22.2 -0.7% Public Utilities ....... 101.4 107.6 6.1% Construction and Land Development ....... 110.9 101.0 -8.9% Public Administration (Gov't Services) ....... 67.5 71.62 6.1 ....... 125.0 202.2 61.8% Professional and other Services .…... 1,656.3 1,807.7 9.1 Total Credit AGRICULTURE (tonnes) Banana Production ....... 33,791 42,326 24.6% Non - Traditional Crops ....... 5,703 4,835 -15.2% TOURISM Total Visitor Arrivals ....... 704,236 813,681 15.5% of which: - Stay over Tourists ....... 276,948 298,431 7.8% - Excursionists ....... 12,817 11,441 -10.7% - Cruise Ship Arrivals ....... 393,262 481,279 22.4% - Yacht Passenger Arrivals ....... 21,209 22,530 -5.9% MERCHANDISE FOREIGN TRADE ($m) Imports (C.I.F.) ....... 1,089.4 1,163.1 6.8% Imports (F.O.B) ....... 958.7 1,023.5 6.8% Exports ....... 167.7 250.2 49.2% ....... -791.0 -773.3 Balance RATE OF EXCHANGE ....... EC$2.70 EC$2.70 US$ TABLE OF CONTENTS Chapter Page 1 Economic Developments………….…..................................................... 1 International Economic Developments...………………………...... 1 Regional Economic Developments……...……....………………..... 2 Domestic Developments.................................................................. 3 2 The Monetary & Financial Sector……………………........................... 11 Monetary developments…..…………………...............….........….... 11 Insurance………….……………………………...................……....... 19 3 Prices …………….……………………………………........................... 25 4 The Real Sector…………….………………………………………....... 27 Tourism.………….………………………………………...……........... 27 Agriculture….…………………………………………………….......... 31 Manufacturing……………………………………………..….............. 39 Construction……………………………………………………............ 42 Transportation…….………………………………….………….......... 48 Communications…....…………………………………………............. 50 Energy…………....……………………………………...………........... 52 5 Government Fiscal Operations……..……………….......…….............. 57 Central Government Fiscal Operations….…....…..………............ 57 Public Debt……....…………………….…………………..….............. 64 6 Trade & The Balance of Payments….....……………..........….........… 67 7 Socio-Demographic Indicators..……………………….….........…....... 75 Population & Demography……………...………..……………......... 75 Education……………………….………………………………............ 77 8 Economic Outlook….……..................…..................................……........ 83 Statistical Appendix CHAPTER ONE ECONOMIC DEVELOPMENTS INTERNATIONAL ECONOMIC DEVELOPMENTS lobal output is estimated to have accelerated to 5.1 percent in 2004, its highest rate in more Gthan three decades. This outturn emanated from widespread growth in all major country groupings but was led by robust growth in the emerging economies of China and India, and was supported by the euro area. Even in Africa and the Middle East positive growth was recorded. A major impetus for global growth has been the volume of world trade in goods and services, growth of which is estimated to have accelerated from 5 percent in 2003 to almost 9 percent in 2004. The increase in world trade occurred despite a 33 percent increase in the average price of oil as expanding demand combined with tight excess capacity and uncertainty associated with supply disruptions. As a result, global inflation edged up to a just over 2 percent from 1.3 percent the year before. Robust advances in household spending and increased capital spending by businesses boosted output in the United States by 4.3 percent, amidst stimulative fiscal policy and significant gains from labour productivity. In keeping with the oil price shock, monetary policy stimulus was gradually withdrawn over the second half of the year as the Fed raised interest rates five (5) times to 2.25 percent by year end. As a result consumer prices were contained to 2.7 percent. However, the US dollar depreciated against most other international currencies as concerns grew over the financing of the growing US current deficit which reached more than 5.5 percent of GDP. Despite continued accommodative monetary policy by the European Central Bank, growth in the euro area remained subdued at about 1.8 percent. Output in France (2.1 percent) exceeded that of Germany (1.2 percent) and Italy (1.3 percent) on account of higher growth in both industrial production and retail sales volume. As the euro area grappled with the need for structural reforms, inflation averaged 2.1 percent amidst relatively high unemployment that reached 8.9 percent in December 2004. Both France (-3.7 percent) and Germany (-3.9 percent) continued to breach the 1 Economic Review EU Growth and Stability Pact’s benchmark for the overall deficit while Italy (-2.9 percent) stood on the threshold. Japan recorded growth of 3 percent amidst unemployment of 4.4 percent and an end to deflation. Although maintaining sizeable trade and current account surpluses of over $130 billion, the country’s budget balance was negative to the tune of almost 7 percent of GDP. In developing Asia, China and India were very buoyant with estimated growth rates of 9 percent and 6.4 percent respectively. In the former, activity was boosted by rapid investment and credit growth while in the latter output was fuelled by the global expansion and supportive monetary conditions. REGIONAL ECONOMIC DEVELOPMENTS lthough having to contend with a major increase in oil prices and a very active hurricane Aseason in 2004, all regional economies except one recorded expansions in output, amidst slightly higher inflation. The impetus for growth emanated from the buoyant global expansion with tourism being the main engine. The region benefited from its perception as a safe destination and the greater purchasing power of European currencies as a result of the depreciation of the US dollar. In Trinidad and Tobago, a 10.5 percent growth in the energy sector pushed overall output up by 6.7 percent as that country benefited from rising oil prices which encouraged increased