Chastanet Stunned; Economy Rebounds

By Stephen Lester Prescott

FOR the past two years, Allen Chastanet, the beleaguered leader of the United Workers Party, has been on every programme in this country to moan, groan, in all his falsity that all other economies in the region are growing save Saint Lucia’s. It did not matter to him that an economy undergoing structural adjustment is not likely to grow in the immediate aftermath of adjustment measures. There was not one single ounce of patriotism or sympathy coming from him. Chastanet is the most unpatriotic Saint Lucian- if we can say he is- to have ever become leader of a political party in Saint Lucia since decolonization.

But Kenny Anthony knew what he was about. He was courageous. He took strong measures. He faced criticism. He pleaded; some responded and helped. For others, like Mary Isaac and Guy Joseph, it did not matter if the country was brought to its knees once the Saint Lucia Labour Party went down with it.

I can do no better today to reproduce in full, the statement made by the Prime Minister and Minister of Finance and Economic Affairs, Planning and Social Security, Dr. Kenny Anthony, at his Press Briefing on Thursday morning. This is the first of a two-part article on what he said to the assembled media:

“ON THE WAY TO RECOVERY”
From time to time, questions are posed by you about the state of our economy. I am pleased to share with you and the public an update on the performance of the economy since the 2015/16 Budget Statement.

I am pleased to report that Saint Lucia’s economy is on the way to recovery after three consecutive years of contraction. You may recall that in the past three years the rate of negative growth had decelerated steadily. Preliminary data for the period January to June 2015 suggest increases in output for most sectors of the economy, led principally by the tourism industry. The rebound in economic performance has been helped by the slow but steady recovery in the economies of the more developed countries to which Saint Lucia’s economy is inextricably linked, as they represent the main source markets for our tourist arrivals.

RECORD PERFORMANCE IN TOURISM
During the first half of 2015, total stay-over arrivals increased by 5.3 percent to 185,424 representing a record level of arrivals over the last five years for the first six months of the year. This performance was mainly attributed to a 12.3 percent growth in arrivals from the United States, our largest source market and highest spending market per person. The performance of the United States market was largely influenced by a steady improvement in the US economy supported by additional airlift in the latter part of 2014, mainly from the North East region of the US. Other markets, such as the Caribbean, also showed improvements in arrivals.

Cruise ship passenger arrivals were also on the upswing, with growth of 9.8 percent to 399,746 passengers visiting our shores during the first half of 2015. This strong performance was mainly attributed to an increase in scheduled arrivals by cruise lines and the return of some other cruise lines. However, preliminary indications suggest that the 2015/16 winter season is likely to see a slowdown in cruise ship arrivals as fewer cruise lines are scheduled to visit Saint Lucia.

TURNAROUND IN CONSTRUCTION INDUSTRY
Saint Lucia’s economic performance in 2015 is likely to be strengthened by the turnaround that is currently being witnessed in the construction industry. Based on preliminary data for the first six months of 2015, the value of imported construction materials increased by 4.8 percent compared with the corresponding period of 2014. Further, expenditure on major construction projects increased for the first half of 2015 compared with the previous year.

Public sector expenditure on construction is expected to increase as several new projects get underway, for example, the Soufriere Square, the Vieux Fort Administrative Complex, the Gros Islet Human Resource Development Centre, and the Aquatic Centre. In addition, plans are in the final stages for work to start on the expansion of the Choc Gros Islet Highway.

In the private sector, work continues on a number of projects such as Tides Sugar Beach in Soufriere, Harbour Club hotel, Unicomer building and Dayana commercial building. The reconstruction of the Smugglers hotel later this year, at an estimated cost of over US$100 million, is expected to have a major impact on the revival of the construction industry.

The recovery in construction could, of course, be boosted even further, if our commercial banks adopt more aggressive lending policies in home construction.

INCREASED PRODUCTION IN MANUFACTURING
Notwithstanding the challenges of the manufacturing sector, indications are that production increased during the January to June 2015 period by 1.8 percent. While the largest and most significant category, food and food products, recorded a 5.9 percent decline in the value of production, increases were recorded in output of corrugated paper and paper board by 13.4 percent, wood and wood products by 29.0 percent and furnishings by 20.5 percent.

Following an increase of 3.5 percent in 2014, the rate of inflation is on the decline in 2015. During the period January to June 2015 growth in the consumer price index averaged 0.3 percent reflecting the dampening impact of lower fuel cost on consumer prices.

IMPROVED FISCAL PERFORMANCE
The improvement in economic performance was not only confined to the real sectors of the economy. The fiscal performance of the Government of Saint Lucia also improved. This was evidenced by an overall surplus during the first quarter (April to June) of the 2015/16 fiscal year, albeit due to the commencement of the implementation of the capital programme.

Total revenue and grants increased by 11.9 percent to $253.84 million while total expenditure grew by 1.7 percent to $235.22 million. This resulted in a surplus of $18.62 million. This compares favourably to the overall deficit of $4.52 million recorded in the first quarter of fiscal year 2014/15.

The current account improved as the surplus for the first quarter increased by 50.5 percent to $45.71 million on account of larger increase in current revenue relative to current expenditure. Current revenue grew by 9.4 percent to $243.87 million while current expenditure was up by 2.9 percent to $198.17, mainly driven by higher interest payments on the island’s debt. The largest contributor to the increase in current revenue was taxes on income, mainly reflecting collections of tax arrears