Rising Prices Trigger Decline In Economy

 

CASTRIES, St. Lucia, CMC - Prime Minister Stephenson King says that high and rising world oil and commodity prices, particularly food prices, have triggered a sharp decline in the economic fortunes of the country.

The Prime Minister also pointed to the passage of Hurricane Dean last August as contributing to the country?s economic downturn.

He was explaining reasons for the fall in the growth rate from 4.9 per cent in 2006, to 0.5 percent in 2007 in his closing remarks Friday in the Budget Debate.

Members of the opposition St. Lucia Labour Party (SLP) flayed the government for the country’s economic decline at a time when they claimed neighbouring CARICOM states were doing well.

However, in his remarks to the St. Lucia House of Assembly King said that these conditions impacted adversely on the performance of the banana industry, and the tourism and construction sectors which all declined last year.

"This was primarily the result of contractions in key productive sectors, particularly tourism and construction, that were then transmitted to the rest of the economy and resulted in marginal and moderated growth in the transport and distributive sectors respectively," he explained.

Prime Minister King noted that by contrast, and buoyed by the properties market, the financial and real estate sectors registered strong growth of 12.1 per cent and 7.6 per cent respectively. Growth in the utilities sector rebounded in 2007 to 12.7 percent, while manufacturing and agriculture provided little stimulus to the economy during the review period.

He said that the tourism sector declined in 2007, despite the steady growth observed in global tourism. Although it continued to provide a major boost to economic growth, real activity in the tourism sector is estimated to have contracted by 7.4 percent in 2007 and its direct contribution to real GDP dipped by 0.7 percentage points to 11.7 per cent.

However, stay-over and yachting visitors who represent the most economically significant segments of the tourism sector, declined by 5.0 percent and 10.3 percent respectively.

King explained that among the many factors responsible for the decline, were the negative impact of rising fuel costs, the passport requirement on US citizens associated with the Western Hemispheric Travel Initiative (WHTI) and the adverse effects of the sub-prime mortgage crisis in the United States.

"In addition contrary to initial expectations, the joint hosting of the Cricket World Cup (CWC) in a number of regional tourist destinations contributed to the fall in arrivals from the US and the Caribbean during the first half of 2007. Some airlift issues and continued competition, particularly in the events market, are also responsible for the downturn in long-stay arrivals," he said.

He said that the performance within the agriculture sector was mixed, with an overall increase in valued-added estimated at 0.8 per cent for 2007.

This represents a deceleration in growth compared with 9.8 percent recorded in the previous year when activity rebounded from previous contractions.

 

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