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Caribbean Islands Table of Contents

Caribbean Islands

Macroeconomic Overview

Growth of the national economy in the 1980s was generally uneven because of the continued reliance on the sugar industry. Both the agriculture and the manufacturing sectors depended on sugar for large portions of their earnings, and aggregate economic performance mirrored the vagaries of the international sugar market.

Gross domestic product (GDP--see Glossary) grew, on the average, by a respectable 2.8 percent annually from 1977 to 1983. Despite significant expansion of tourism-related services, this figure would have been higher were it not for an actual decline in GDP of 2.4 percent in 1983 because of poor performance by the sugar sector. Sugar rebounded in 1984 so that aggregate economic performance rose by 3.3 percent, but GDP growth was reduced to only 1 percent in 1985, again the result of the weak performance of sugar. GDP grew in 1985 solely because of the strong performance of tourism and related construction projects.

The shift toward the service sector was evidenced by the economic figures for 1985. About 67 percent of GDP was accounted for by wholesale and retail trade, communications, and financial and government services. Agriculture and manufacturing each accounted for about 13 percent of GDP; the other economic sectors accounted for the remaining 7 percent. This trend was expected to continue into the 1990s, particularly if more tourist accommodations could be added to those already existing on the two islands.

Employment statistics in the mid-1980s, although widely regarded as unreliable, also reflected the growing importance of the tourist and manufacturing sectors. By 1982 a reported 26 percent of the work force was associated with trade, hotels, and other services, whereas 22 percent was employed by the manufacturing sector. The agricultural sector (primarily sugar) still employed one-third of the total work force, and sugar processing was still an important part of the manufacturing sector. Most of the remaining 19 percent of the labor force worked for the government, and about 5 percent were employed in the construction industry.

Despite the existence of government-run employment agencies on both islands, unemployment statistics were unavailable in the mid1980s . Best estimates, however, placed the unemployment rate between 20 and 25 percent. This high level of unemployment has been variously attributed to the unwillingness of the labor force to attempt nonsugar agriculture and the lack of training necessary to make the transition to tourism-related services. Unemployment was not expected to decrease in the immediate future, unless the government became more successful at coordinating education and technical training with the demands of the labor market.

Inflation in the Kittitian economy was typical for a Caribbean island in the mid-1980s; it was fueled by both internal and external sources but tended to parallel world inflation because of the open nature of the domestic economy. Because St. Kitts and Nevis was so dependent on imports, the price changes of these goods often had a strong effect on the domestic inflation rate. Local inflationary pressures, such as wage increases, were also occasionally evident but generally had a minimal effect on prices in the mid-1980s.

After rising at double-digit rates in the early 1980s, inflation as measured by the consumer price index fell to 3.6 percent in 1983, 2.7 percent in 1984, and 1.8 percent in 1985. This decline reflected global trends, as well as stable prices for essential imports and minimal increases in domestic wages. Stable prices and wages were expected for the rest of the decade.

Data as of November 1987