PM King: '...our optimism must be tempered by the realisation that spending in our source tourism markets is unlikely to be robust...'

By Ernie Seon

 

CASTRIES, St Lucia, CMC - Prime Minister Stephenson King is predicting that the St. Lucia economy will show signs of recovery this year, even as he warned that this optimism must be tempered with a dose of reality.   

 

“Clear signs of recovery in the global economy have already started to emerge, as a number of countries including the United States appear to be coming out of the recession,” King said in a nationwide radio and television broadcast on Tuesday night.

 

“However, the severity of the recession coupled with the crisis in the financial system has resulted in serious reduction in the wealth of households, prompting a shift towards increasing savings and lowering consumption spending,” said, King, who is also the Finance Minister.   

 

He said over the years, consumers have been the major driving force behind US economic growth, but there is a real sense that their new found frugality will dampen growth for the foreseeable future.  

 

“This is not very good news for small countries like St Lucia, as spending by Americans on activities such as long haul travel vacations is likely to be low on the list of priorities for the average household budget.   

 

“In general, our optimism must be tempered by the realisation that spending in our source tourism markets is unlikely to be robust, investor confidence will continue to be low for some time and the global recovery, though present, is likely to be weak.”

 

The Prime Minister said as far as the government’s financial situation is concerned, the fiscal position is likely to remain very challenging over the next two years, as revenue growth remains weak, while expenditure pressures increase.   

 

“We will have to ensure that the capital investment programme, which plays a crucial role in generating growth, is not compromised. As we emerge from the recession, it will be necessary  to strengthen the resilience of our economy to external shocks and to build the fiscal space necessary for government to respond to economic downturns such as we are currently experiencing,” he added.  

 

King said his optimism for the economic prospects for 2010 rests on the unexpected turn around in the tourism industry and a construction boom expected as early as the second quarter of this year. 

 

He said while the global economic and financial crisis resulted in a fall in tourist arrivals, reduced foreign investment for construction of hotels and other projects and a contraction in domestic economic activity in 2009, the government was successful in attracting additional airlines, resulting in increases in visitor arrivals particularly during the latter part of last year.

 

“We are confident that the decline in the tourism industry experienced during the first nine months of 2009 has bottomed out and brighter days lie ahead for the industry. 

“While current trends are projected to be sustained in the months ahead, we will continue to strengthen the marketing of St Lucia as a prime tourist destination, to take advantage of the increases in available airline seats throughout the winter season and beyond.”   

 

The Prime Minister said the construction sector is also expected to provide significant growth in 2010 as new projects begin, among them a EC$150 million (US$56 million) hospital.

 

King told citizens that last year was a difficult year by any standard, requiring everyone to engage in belt tightening measures.

 

“As the global recession intensified, we were all concerned about its impact on St. Lucia.  Through very rough conditions and trying times, St Lucia was able to weather the storm better than expected.   

 

“The government for its part provided much needed support and relief through its fiscal stimulus programme. The situation would have been much worse, had it not been for the timely and effective intervention of the government.”

 

But the Prime Minister said this would not be heard from the main opposition St. Lucia Labour Party (SLP), which preferred to focus only on a few revenue measures introduced by government and classifying them as a “tax assault” on St Lucians.   

 

“They will never admit, although it is well known, that the few revenue measures we implemented were aimed at increasing efficiency and reducing waste. Also, those measures were introduced in such a way as to minimise any possible burden on the people of this country. 

 

“Their amnesia will never allow them to remind you that we lessened the burden of the global recession on St Lucians by introducing a number of measures and initiatives, such as increasing the personal income tax threshold by EC$1,000 (US$375) which had the effect of moving 800 persons from the income tax net, while making available more disposable income to taxpayers,” the Prime Minister said, adding that concessions were also given to first time home owners to stimulate the construction sector.

 

“We have improved the system for the payment of tax refunds, with a view to helping to increase the liquidity of individuals and businesses, introduced development finance programs for the youth and key sectors of the economy through the St. Lucia Development Bank…”

 

He said the government had also “implemented a substantial capital programme, aimed at minimising the negative impact on growth created by the recession, thus securing jobs and protecting the vulnerable, and partnered with the wider public sector, as well as the private sector, on a range of investment projects and programmes”.

 

King said all these initiatives helped St Lucians weather the global economic storm and provided the platform for a better than expected economy in 2009.

 

He said the main priorities of the government include job creation, preventing job losses and protecting the poor and vulnerable.

 

CMC