Saint Lucia is an island nation located in the Windward Island Chain, an archipelago of the Caribbean Sea. With its strategic position in the centre of the Caribbean islands, the Saint Lucian economy is the ideal place to access key regional, near shore and international markets. Moreover, as an active member state of the Commonwealth of Nations and a party of numerous trade agreements with the Caribbean Community (CARICOM) member states, the US, Canada and Europe, the island holds its ground as one of the best places to do business amongst the Caribbean English-speaking countries. Saint Lucia has in fact been consistently ranked as such by the World Bank’s Annual “Ease of Doing Business Survey”, due to comparative advantages in areas of regulation, starting a business, market accessibility, incentives, taxation and quality of life.
In 2017, vulnerability was a central topic for the Caribbean region economies, as severe natural disasters affected several countries, resulting in significant economic and social damages losses. However, thanks to the buoyant tourism sector and an increase in construction activities, Saint Lucia proved itself as one of the most resilient counties amongst the Lesser Antilles area.
Key Indicators for the Saint Lucian Economy
Saint Lucia GDP growth
According to the Eastern Caribbean Central Bank (ECCB), provisional data suggest that activity in the Saint Lucian economy accelerated 2017. The ECCB has estimated that real GDP is estimated to have expanded by 2.7%, following a 1.7% growth on an annual basis. The expansion was led by improved performances from the hotel and construction sectors: in the fiscal year 2017, the hotel sector in fact increased by 4.73%, whereas the construction sector increased at a significant average growth rate of 9.06% between fiscal years 2015 and 2017. Such progress may be attributed to several initiatives enacted by the local government aiming to enhance infrastructural development, which is set to continue over the next 10 years.
The expansion of economic activity was also driven by improvements of other major contributions to real output, such as restaurants, wholesale and retail trade as well as transport, communications and storage. Data concerning the value added by hotels and restaurants sectors, suggests that the tourism sector is a stronghold and main contributor to the island nation’s economy, along with agriculture and manufacturing sectors.
Saint Lucia Employment
The World bank estimated that the total labour force comprised of 99,136 jobs in 2017. The major contributors to employment were respectively the Services sector, which accounted for 67.36%, the Industry Sector with 17.30% and the Agricultural sector with 15.34% of total employment. Another study published by the World Travel Tourism Council provided further information regarding the contribution to the total employment of the Services sector. According to the study, in 2017 the Travel and Tourism sector supported 20,000 jobs directly and 38,500 indirect jobs. The figures are set to rise respectively by 6.0% and 5.5% in 2018. These figures suggest that the sector has undeniably had a high impact on the island’s economy and growth.
In 2017, Saint Lucia recorded an unemployment rate of 20.2%, down from 21.3% at the end of 2016. Although it may appear to be a high rate by international and European standards, it is actually the country’s lowest unemployment rate since 2007. The youth unemployment rate declined marginally to an estimated 38.5%, partly due to an increase in the number of construction-related jobs and several key provisions enacted and geared by the government towards developing the young labour force participation, such as the National Apprenticeship Program.
Saint Lucia Inflation
Prices of goods and services in the Saint Lucian economy are estimated to have risen by 2% during 2017 on an end of period basis, as indicated by upward movements in the consumer price index. This out-turn contrasts a deflation rate of 2.8% recorded during 2016 and was mainly a result of an increase of house rental and oil prices.
Saint Lucia Fiscal Operations
As stated by the ECCB, the central government’s operations resulted in a positive outturn, mainly due to a positive development on the current account which recorded a surplus for the fifth consecutive year. This improvement was largely the result of an expansion in current revenue (+2.7%), supported by a fall in current expenditure. Such growth was influenced by increases in both tax and non-tax revenue yields. An increase of 25.1% ($12.5m) was noted for non-tax revenue, associated largely with receipts from the Citizenship by Investment Programs (CIP).
Despite the Government’s efforts to handle the public debt, the debt-to-GDP ratio for the Saint Lucian economy is still high. The ECCB’s estimations suggest that it was equal to 67.5% by the end of 2017, thus increasing by 0.5% from 2016. The overall growth of the public debt expenditure is attributable to an increase in borrowing from the Central Bank.
In its 2017 Budget proposal, the government planned several initiatives which are projected to affect the island’s taxation structure.
The Prime Minister announced the implementation of the excise on fuel. The inflow generated by the new tax would be directed exclusively to finance a program of road enhancement thus ameliorating the island’s infrastructure with positive effects on transports, trade and tourism. However, the general increase in international oil prices negatively affected the provision, which did not achieve the target; indeed, the actual excise tax rate on gasoline has been below the aimed XCD$4.00 per gallon. Thus, the government proposed to remove the cap on fuel prices to finalize the measure.
As of 2017, Saint Lucia is no longer included in the EU Black list of tax heavens. This will surely improve the island’s reputation and trustability, as being included in the Black list represented a threat to potential foreign investments in the country.
Following the success of the Citizenship by Investment program, and subsequent high competition from the other Caribbean programmes, the Government has proposed the introduction of a residency program in order to attract High Net Worth Individuals (HNWIs) who wish to relocate to Saint Lucia but who do not necessarily require a Saint Lucian passport. This option will encourage HNWIs to stay in the country, thus generating possible positive effects on consumption of goods, arrivals and transportation. Nevertheless, the residency programme does not require the physical presence of the applicant as it does not ask the individual to establish a domicile status, but merely to establish residency. In such cases, the HNWI will be subject to taxation only for the income remitted in the country.
Core sectors in the Saint Lucian Economy
Albeit being traditionally reliant on agriculture, over the past decade Saint Lucia has been able to change pace and attract foreign business and investments, particularly in its offshore banking and tourism industry. As mentioned earlier, tourism is the largest contributor to the island’s GDP and the main source for foreign exchange earnings. The manufacturing sector is also relevant in the Saint Lucian economy and it is one of the most varied in the Eastern Caribbean islands. The production of crops such as tropical fruits and avocado is still growing at a steady pace, supported also by external demand. In 2017, the main sectors were namely Services which counted 82.8% of GDP, the Industrial sector with 14.2% of GDP and Agriculture contributing 2.9% of GDP.
Saint Lucia Tourism Sector
The tourism Sector in Saint Lucia is vibrant and enjoys a robust growth. The positive trend reflects an increase in arrivals, both cruise ship passengers and stay-overs, which has gone up by 10.9% compared to the preceding year. The largest contribution to such growth can be attributed to cruise ship passengers, whose number increased by 13.7%. The reason for the expansion of the number of cruise passengers is reflective of bigger vessels and the overall number of ships berthing which have increased from 381 to 432 on an annual basis. The upsurge of stay-overs (+11%) was supported by an increase of airlifts from all the source markets including the USA, Europe, the Caribbean and Canada. International airline companies such as Air Canada, American Airlines, Delta, British Airways, Virgin Atlantic, Sun Wing, JetBlue and United Airlines are planning to expand their operations between the end of 2018 and beginning of 2019, which will presumably lead to a further expansion of visitor arrivals and stay overs from North America for the last quarter of 2018 and Q1 of 2019.
The impact of Tourism on the Saint Lucian economy is thus set to grow steadily. According to the WTTC, the total contribution of the sector to the gross domestic product was equal to 41.8%. It is forecast to rise by 5.7% pa to 54.9% of GDP by 2028. This also includes wider effects from investments, the supply chain and induced income which primarily reflects the economic activity generated by tourism-related industries such as hotels, travel agents, airlines and other passenger transportation businesses that are directly supported by tourists.
Saint Lucia Construction Sector
The construction sector is one of the drivers of the island’s economic growth. Construction activity is led by a highly anticipated increase in the various productive sectors, but is mostly driven by the Tourism industry. Several tourism-related development plans are in fact foreseen to take place over the coming years, which will involve many international hotel chains such as Royalton Property, the Harbour Club Hotel, the Coconut Bay Resort, the Sandals Resort and the Pearl of the Caribbean resort. Moreover, Saint Lucia has envisaged a few more projects in the pipeline which will start under the Citizenship by Investment Programme (CBI). Contribution to growth will be supported also from a few private residential and commercial buildings, coupled with infrastructural development from the public sector.
Saint Lucia Manufacturing Sector
Estimations from the ECCB suggest that Manufacturing has continued to grow, albeit at a slower pace than what was recorded in the past year. Value added in that sector rose by 1.7 per cent in 2017, less than a half of the growth of 3.8% achieved in the past year.
The overall manufactured goods output recorded an expansion in production, supported by an increase of 2.1% in output of miscellaneous manufactured articles. Over the years Saint Lucia’s manufacturing sector has been able to create opportunities in various other areas of the Saint Lucian economy, such as agro-processing, textiles, electronic assembly, beverage brewing, bottling and distilling, carbon fibre high speed boats, and green technology innovations thus keeping abreast with the international trends and external demand. However, despite the increase in activity, the sector’s contribution to overall GDP declined marginally to 5.5% from 5.6% in 2016.
Saint Lucia Citizenship by Investment Programme and the Economics of Citizenship
In order attract foreign investments and raise funds for large-scale development projects, Saint Lucia decided in 2015 to follow its neighbours’ footsteps and introduce its first Citizenship by Investment Programme. The island nation claims to offer to its prospective new citizens the most varied options of investments currently offered by any other country in the Caribbean, as well as a swift three-month process to acquire the citizenship.
Moreover, following the amendment of the regulation enacted in 2016, the government introduced remarkable changes in the Saint Lucia Citizenship by Investment Programme concerning the qualifying requirements for the investments in National Economic Fund with the aim to make the programme more appealing for potential applicants. Indeed, Saint Lucia’s citizenship by investment programme is undoubtedly one of the largest and successful programmes in the Caribbean, and is leaving its mark on the Saint Lucian economy: figures divulged by the head of the CEO of Saint Lucia’s CIP Unit, Nestor Alfred, revealed that they have received 279 applications since opening.
- Visa free travel to over 142 countries worldwide, including EU Schengen member states;
- The inclusion of family members;
- A favourable tax system;
- Right to live and work in St Lucia and other CARICOM (Caribbean Community) countries.
- No residency requirements;
- Rights and privileges of citizenship of a Commonwealth country in the UK and other Commonwealth countries.
To qualify for the Saint Lucian Citizenship, applicants have to meet certain requirements stated by the Saint Lucian law. Saint Lucia’s Citizenship by Investment Program was brought into force via the Citizenship by Investment Act No. 14 of 2015 and the eligibility requirements for the program were delineated in the Citizenship by Investment Saint Lucia Regulations S.I. 89 of 2015. As mentioned earlier, the eligibility requirements have been subsequently revised in the Citizenship by Investment Amendment Saint Lucia Regulations S.I. No. 3 of 2016, in order to enhance competitiveness with other countries offering similar programs.
As stated by Law, a prospective applicant must:
- Be at least 18 years old;
- Undergo a Fit and Proper test and prove that they can make the investments required by Law;
- Have a clean criminal record and be in good health;
- The programme can be extended to the main applicant’s dependants, who may include the spouse, children and parents;
Unlike other Caribbean programmes that offer between two and three possibilities of investment, the Saint Lucia citizenship by investment programme proposes up to four options which the prospective applicant may choose from:
- Minimum Contribution of 100,000 USD to Saint Lucia’s National Economic Fund;
- Minimum purchase in the real estate of 300,000 USD, which must be kept at least for five years;
- Investment of 500,000 USD in government bonds;
- An investment into an Approved Enterprise Project. This option is the most flexible, as it can be done either by an individual or by joint investors. The sole applicant minimum investment amount is of 3,500,000 USD; Joint investors minimum investment amount is 6,000,000 USD, with each applicant contributing a minimum of $1,000,000 USD.
According to the Prime Minister, since the Saint Lucia Citizenship by Investment programme’s launch, the island has attracted four major hotel developments with a combined investment value of over US$ 1 billion. According to the International Monetary Fund’s latest report, in 2017 the citizenship by investment programme was the largest contributor to GDP (0.9%) for Non-tax revenues, and predictions suggest that the programme will continue to represent a relevant source for Saint Lucia’s economy also in the upcoming five years.
Saint Lucia Economic Outlook
The Caribbean area was recently scourged by natural disasters: however, its local population managed to make a virtue out of necessity. The post-hurricane reconstruction, robust tourism, and supportive commodity prices are in fact expected to have stimulated significant growth by the end of 2018.
Data suggests that the island’s economy has expanded by 2.7% further compared to a growth of 1.7% from the previous year. Although the dynamics suggest an overall positive outlook for the Saint Lucian economy in the short term, it must be highlighted that there are still risks in the medium term, including external shocks given by financial market developments as well as unexpected increase in inflation, due to for instance a further increase of oil prices. Besides external factors, the Saint Lucian economy expansion is also threatened by domestic challenges, amongst all, the high dependency on the tourism industry.
Nevertheless, according to the Caribank report, GDP is set to grow by 3.1% in 2018. Construction output is expected to be supported by private sector activities and buoyed by tourism, which are likely to be strengthened and boosted by upcoming projects implemented under the Citizenship by Investment Programme.