Previously, Saint Kitts and Nevis economy was almost entirely based on sugar production. As profitability declined in the sugar industry, the country developed other industries. In 2005, the entire sugar industry was shut down. Foreign finance companies have been attracted to the country through favorable tax rules, and the tourism industry has expanded. Nowadays, tourism draws in more foreign currency than commodity exports.
In recent years, the share of agriculture and industry (mainly construction) in the share of gross domestic product (GDP) has decreased, while the service sector (tourism and finance) has grown steadily.
Countryaah.com: Major imports by St. Kitts and Nevis, covering a full list of top products imported by the country and trade value for each product category.
After some troubling years in the early 2000s, which were linked to the economic downturn in the United States, the islands’ economy began to grow. Large overseas-financed hotel construction contributed to high growth in the years 2004-2008, but then the trend reversed. The international financial crisis of 2008 led to reduced tourism revenues, while the important flow of money emigrants sending home to the islands slowed. The crisis was exacerbated by Hurricane Omar, which, among other things, destroyed Nevi’s largest hotel. In 2009 and 2010, the economy shrank, and the crisis also accelerated the usually low inflation.
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The government acted by raising the minimum wage and began to sell government land cheaply to those who earn the least. At the same time, budgetary tightening was implemented. The salaries of government employees were frozen and a tax on goods was introduced.
In order to get the economy back on its feet, the International Monetary Fund (IMF) gave the country a three-year loan in 2011. In the same year, growth reversed again. With the exception of a setback in 2012, economic development was good during the period 2013–2016. In 2015, the IMF loans were repaid. The reasons for the economic upswing were, according to the IMF, better times for the tourism industry and the construction industry. In addition, the government that took office in 2015 implemented a number of tax cuts, including abolished VAT, to reduce the living costs of the inhabitants and to boost domestic consumption.
A major challenge for the country’s economy is the heavy debt burden, which arose in part when the state supported the unprofitable sugar industry for many years. The central government debt was around 150 per cent of GDP before just over half of the external debt was written off in 2012. In some years, almost half of the central government’s revenue has been paid off on the national debt. Around mid-2010, it had fallen to around 70 percent of GDP.
The country also has a large deficit in foreign trade, that is, exports are significantly smaller than imports. The trade deficit is offset by income from tourism as well as money that emigrants send home to their families. The state also gets some money by selling citizenship to foreigners, a program that has attracted criticism from several directions (see Current Policy).
Attempts to attract foreign finance companies to the country – especially to the smaller island of Nevis – were hit by setbacks in the early 2000s when the Western Economic Cooperation Organization put Saint Kitt and Nevis on its black list of nations that do not cooperate to prevent money laundering (various financial transactions for the purpose of converting illegal income into legal). Since then, the country has introduced new laws to meet the OECD and it has since been removed from the OECD’s lists. However, the country continues to receive criticism from, for example, the US and the EU for overly liberal tax laws, overly strict banking secrecy and for not doing enough to prevent money being illegally “laundered” in the country’s financial sector.
