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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
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