Saint Lucia
Annual Economic and Financial Review: 2022

Overview

• Preliminary estimates point to a further expansion in economic activity in Saint Lucia in 2022. The economy grew by 15.9 per cent, up from 12.2 per cent in 2021. Growth was underpinned by expansions in several economic sectors including tourism, agriculture, and manufacturing.
• Inflationary pressures persisted in 2022, largely influenced by the global surge in commodity prices. Meanwhile, the fiscal balance improved, consistent with greater economic activity and capital expenditure restraint.
• In 2023, the economy is projected to continue on the path of expansion. However, the pace of growth will be slower than that of 2021-2022.

Snapshot of Economic and Financial Developments for 2022 - Saint Lucia

The Economy (Real Sector)

The Saint Lucian economy grew at an unprecedented rate of 15.9 per cent in 2022. Consequently, the size of the economy was roughly 2.0 per cent below its 2019 level (Figure 1). The rebound was spurred by robust growth in tourism and related sectors, along with agriculture and manufacturing.

Value added in the accommodation and food sector, which captures tourism activity, rose by 67.6 per cent in 2022. This was primarily on account of a 78.7 per cent increase in stay-over arrivals to 356,237, which represents approximately 84.0 per cent of 2019 arrivals (Figure 2). Arrivals from the USA and the UK surpassed the 2019 levels and accounted for 59.0 per cent and 23.0 per cent of total stay-over arrivals, respectively. Exponential growth was recorded in visitor arrivals from all other source markets including Europe and the Caribbean, but the numbers still lag behind the pre-pandemic level. The cruise and yacht sectors have not yet recovered from the pandemic. As a percentage of 2019 figures, cruise passengers amounted to 45.0 per cent (349,922) and yachties, 34.0 per cent (22,815). As a result of these movements, overall visitor arrivals in 2022 totalled 736,866, relative to 301,675 in 2021 and 1,286.0m in 2019.

Value added in the wholesale and retail trade and transport and storage sectors grew by 12.0 per cent and 18.0 per cent, respectively, largely driven by the strong increase in visitor arrivals. The agricultural sector expanded by 9.8 per cent, resulting from increased crop production under several initiatives including the Seven Crops Project, the use of technology as part of the Agriculture Intelligence Information Systems, and the Youth Agriculture Enterprise Program. The opening of new regional markets for bananas and higher local consumption led to a more than doubling of banana output. Value added in the manufacturing sector rose by 8.0 per cent reflecting higher production of paper and metal products and beverages. Meanwhile, activity in the construction sector contracted by 10.0 per cent mainly due to a slowdown in public sector projects.

Consumer Prices

The annual inflation rate in Saint Lucia rose to 6.9 per cent at the end of 2022, from 4.2 per cent at the end of 2021 (Figure 3). Higher price levels were recorded for housing, electricity, gas and other fuels (21.1 per cent); alcoholic beverages (10.2 per cent); furnishings and household equipment (8.5 per cent); food (7.4 per cent), and transport (4.5 per cent). Overall, Saint Lucia’s inflation rate reflected higher global prices for energy and food emanating from the spill overs of the war in Ukraine and Supply Chain disruptions associated with China’s Covid-19 containment strategy.

Government Operations

The fiscal position of the central government improved in 2022 on account of two factors – the general increase in tax revenue associated with the expansion in economic activity and a reduction in capital expenditure (Figure 4). The overall deficit narrowed to $156.2m (2.9 per cent of GDP) at the end of the calendar year, compared with a deficit of $278.5m (6.1 per cent of GDP) at year’s end, 2021. The primary balance transitioned to a surplus position of $22.8m (0.4 per cent of GDP) in 2022, in contrast to a deficit of $110.7m (2.4 per cent), with positive implications for the debt dynamics.

Current revenue grew by 6.2 per cent to $1,152.6m (21.6 per cent of GDP) following growth of 18.8 per cent in 2021, consistent with the economic recovery. Tax revenue, which accounted for 90.0 per cent of current revenue showed significant gains, growing by 5.0 per cent ($49.5m) to reach $1039.0m, similar to the level obtained in 2018. Receipts on all main tax categories increased, with the most sizable growth from taxes levied on international trade and transactions. Non-tax revenue rose by 18.5 per cent ($17.8m) to $113.6m due to higher inflows from the Economic Citizenship Program and other non-tax revenue.

The growth in current expenditure was marginal, increasing by 0.7 per cent ($7.8m) to $1,182.4m (22.1 per cent of GDP). In comparison, current expenditure grew by 2.9 per cent ($32.6m) in 2021. The main drivers of the increase in current expenditures were higher interest payments ($11.1m) and transfers and subsidies ($12.4m). This was offset by the decline in spending on goods and services ($16.2m).

Consequently, the current account deficit totalled $29.8m (0.6 per cent of GDP) in 2022, compared with one of $89.3m (2.0 per cent of GDP) in 2021. On the capital account, grants fell by 8.4 per cent to $59.8m contributing to a reduction in expenditure by 27.8 per cent to $186.2m.

Banking Developments (Monetary)

During 2022, domestic claims (credit) contracted while deposits grew. Bank credit contracted by 0.8 per cent to $2,953.6m in 2022, following a decline of 2.9 per cent in the prior year. This outturn was the result of an improvement in the net claims on general government, as the increase in deposits (liabilities to government) offset that of claims (credit). Meanwhile, in the private sector, credit extended to both businesses and households rose by 2.9 per cent and 0.8 per cent, respectively.

All categories of deposits increased with the most notable being transferable deposits,² which rose by 6.0 per cent. The growth in deposits resulted in a higher liquidity position for commercial banks, as the total loans and advances to deposits ratio fell to 69.5 per cent at the end of 2022 from 71.9 per cent one year earlier. Commercial banks’ asset quality continued to deteriorate for the third consecutive year, induced by the pandemic. The non-performing loan (NPL) ratio increased to 14.2 per cent from 13.8 per cent in 2021.

External Trade

The visible trade deficit widened to $2,001.2m (37.5 per cent of GDP) in 2022, from $1,467.1m (32.1 per cent of GDP) in 2021. The widening of the deficit reflected strong growth in import payments ($587.6m) due to the simultaneous effects of a higher volume of tourism-related imports, greater local demand for foreign goods, and an uptick in global prices for energy, food, and used cars. Export receipts also rose by $53.5m mainly derived from the re-export of mineral fuels. On the services account, gross travel receipts rose by 52.5 per cent to $2,321.4m associated with buoyant tourism inflows.

Outlook

Following double-digit GDP growth rates for two consecutive years, Saint Lucia’s economy is projected to fully recover from the pandemic in 2023. The economy is expected to experience single-digit growth in 2023 led by continued growth in tourism, agriculture, and manufacturing. The construction sector is also expected to revert to positive growth, as government resumes activity on the Hewanorra International airport and St Jude’s Hospital, as well as investments in roads and social services infrastructure. Private sector construction activity will consist of tourism-related investments, expansion of commercial spaces, and residential construction.

Selected Economic Indicators