Annual Economic and Financial Review -December 2018

2018 Annual Economic and Financial Review ST KITTS AND NEVIS

in 2019, relative to the performance in 2018. The positive outlook is fuelled by higher value added contributions from the hotels and restaurants, construction and agricultural sectors . An increase in construction will reflect continued public investment combined with ongoing private sector activity. The public sector investment programme will reflect road resurfacing in both St Kitts and Nevis, the renovation and construction of public buildings, as well as completion work on the second cruise pier prior to the commencement of the cruise season in 2019. Developments in the private sector will be underpinned by further investments in the room stock on both islands, coupled with other service related projects that are either about to commence or are approaching an advanced stage of activity. Developments in the tourism industry will be augmented by increases in airlift and the anticipated bump associated with the completion of the second cruise pier. The impact of developments in the construction and hotels and restaurants sectors will likely generate positive externalities with favourable knock-on effects on other major sectors including; wholesale and retail trade, transport, storage and communications, real estate renting and business activities and

financial intermediation sectors. Higher real sector activity could induce inflationary pressures in the domestic economy.

A smaller fiscal surplus for the Federal Government is anticipated, consistent with a more modest outlook for non-tax revenue and sustained public sector related capital expenditure. Tax revenue receipts is estimated to remain buoyant in tandem with real sector activity, however the effect may be tempered by higher current expenditure reflective of recent policy pronouncements in the 2019 Budget. There are a number of downside risks that could negatively impact the outlook and result in slowdown in the forecasted rate on growth. One of the main ones include a possible strengthening in global commodity prices, particularly fuel and food and the attendant impact on the overall fiscal balance and the domestic cost of doing business. The anticipated departure of Britain from the European Union (Brexit) and the possibility of a “No-Deal” exit also represents an outlying risk to the Federation, from which 7.5 per cent of stayover visitors originate. Lower than expected inflows from the CBI programmes could also affect both the current

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