St. Kitts and Nevis was the last sugar monoculture in the Eastern Caribbean until the government decided to close the sugar industry in 2005, after decades of losses at the state-run sugar company. To compensate for the loss of the sugar industry, the Government of St. Kitts and Nevis has begun exploring alternative energy uses for sugar cane. The United States and Brazil have agreed to develop biofuels programs in the region.
The economy of St. Kitts and Nevis experienced strong growth for most of the 1990s, but hurricanes in 1998 and 1999 and the September 11, 2001 terrorist attacks hurt the tourism-dependent economy. Economic growth picked up in 2004, with a real GDP growth rate of 6.4%, followed by 4.1% growth in 2005. The GDP growth rate rose to 5.8% in 2006, mostly as a result of diversification into tourism and construction related to the Cricket World Cup. Tourism has shown the greatest growth and is now a major foreign exchange earner for St. Kitts and Nevis, as evidenced by an 83% increase in foreign direct investment in a range of tourism-related projects. Recent significant investment included a 648-room Marriott hotel and convention center that opened in December 2002, as well as 2007 plans for "Christophe Harbor," a U.S. investor-funded $500 million resort project. The government instituted a program of investment incentives for businesses considering the possibility of locating in St. Kitts or Nevis, encouraging domestic and foreign private investment. Government policies provide liberal tax holidays, duty-free import of equipment and materials, and subsidies for training provided to local personnel.
However, the debt of public enterprises has increased, and total public and publicly guaranteed debt reached $290,740,000 in 2006. Consumer prices have risen marginally over the past few years. The rate of inflation, as measured by the change in the CPI, rose on average by 5.3% in 2006, compared with 3.6% in 2005 and 2.3% in 2004.
St. Kitts and Nevis is a member of the Eastern Caribbean Currency Union (ECCU). The Eastern Caribbean Central Bank (ECCB) issues the Eastern Caribbean dollar (EC$) for all members of the ECCU. The ECCB also manages monetary policy, and regulates and supervises commercial banking activities in its member countries. The ECCB has kept the EC$ pegged at EC$2.7 to U.S. $1.
Information by U.S. Department of State
