IMF Executive Board Concludes 2007 Article IV Consultation with St. Kitts and Nevis

The closure in 2005 of the sugar industry—the historical mainstay of the economy—set the stage for a new economic course. Indeed, despite the closure, growth remained strong in 2006, with output increasing by 4 percent, driven by tourism, construction, and communications. Some slowdown is expected for 2007, with growth projected at 3.3 percent. Medium-term prospects look promising, with a number of high-end foreign investment tourism projects in the pipeline. Large adjustments in retail fuel prices and a new fuel surcharge for electricity created a temporary inflation spike in 2006, but inflation has since decelerated as these one-off effects dissipated. Reflecting strong construction-related imports, the current account deficit increased to around 30 percent of GDP in 2006/07, but has been largely financed by tourism-related foreign direct investment (FDI).