Economy and Trade
Having achieved an average growth rate of 6.5% for a 20-year stretch during the 1970s and 1980s, fuelled by a tourism boom and strong inward investment, the two island nations of Antigua and Barbuda were crippled by a series of hurricanes in the 1990s. This was further exacerbated by a fall in tourism following the 9/11 terrorist attacks in the United States. In 2004, a new administration came to power with a fresh sense of purpose, and Antigua has experienced solid growth since 2003. Growth peaked at 12% in 2006 on the back of the Cricket World Cup. Antigua’s economy and reputation as an offshore financial center were badly damaged by the 2009 scandal involving alleged swindler Allen Stanford and what US authorities have described as his Antigua-based US$8 billion Ponzi scheme. The global economic downturn also precipitated a decline in tourism, foreign direct investment, and remittances, leaving Antigua and Barbuda to grapple with the worst economic crisis in its history. Agricultural production, which is almost entirely for local consumption, has to battle both a limited supply of local water, and the fact that agricultural wages are below the rates for both tourism and construction. Literacy and secondary education are around 85%, and there is some manufacturing for export.
Economic Policy over 12 Months
In March 2010, the Antiguan authorities and an International Monetary Fund (IMF) staff mission announced that they had reached an agreement on a standby arrangement for SDR81 million (about US$124 million) over 36 months. The IMF will formally announce whether it has approved the staff mission’s recommendation in May 2010.
The government and the IMF staff mission agreed to strengthen the fiscal position under the program through a range of policy measures, including more efficient tax collection, a reduction in the interest bill on both domestic and external debt, and actions to streamline government expenditure and raise revenue, while protecting targeted social spending. The fiscal program and debt management strategy are geared to both eliminate debt arrears and reduce the debt/GDP ratio over the coming years.
The IMF’s statement added that the fiscal strategy would be supported by reforms to: (i) strengthen public financial management; (ii) improve the collection of revenues at the Customs and Inland Revenue Department; and (iii) ensure the long term sustainability of the pension system.
The government will also have to take measures to win back the confidence of the international community. In March 2010, the US State Department listed the country on its Major Money Laundering List 2010, noting that although it has legislation to regulate its financial sector, it remains susceptible to money laundering due to its offshore financial sector. Furthermore, the country had already been gray-listed as a secretive tax haven by the Organisation for Economic Co-operation and Development.
In its March 2010 statement the IMF and the government added that the authorities would implement reforms aimed at strengthening the financial sector, including the passage of legislation to transform the Financial Sector Regulatory Commission into a single regulatory unit for offshore banks and nonbanks.
The government is also working closely with the regional central bank—the Eastern Caribbean Central Bank (ECCB), and with the European Union and the United States to try to both manage a legacy of foreign debt that exceeds 100% of GDP, and to develop the economy beyond its single mainstay of tourism. One of the positives achieved in the Eastern Caribbean Currency Union (ECCU) in 2008 was the establishment of a Free Movement of Skills regime across the region, which came into force on June 13, 2008. Caribbean nationals that have obtained Caribbean Vocational Qualifications (CVQ) are free to move about the region.
Economic Performance over 12 Months
The IMF estimates that the economy in Antigua and Barbuda shrank by 6.5% in 2009 and anticipates a further fall of 1.5% in 2010, following growth of 2.8% in 2008 and 6.9% in 2007. Apart from a slump in tourism revenues, the country was badly hit by the arrest of financier Allen Stanford. On February 17, 2009, the US authorities charged Stanford with massive ongoing fraud related to US$8 billion in investment deals. The charges were largely based on the sale of high-yield certificates of deposit under false pretences by the Antigua-based Stanford International Bank.
Stanford had based a number of his key regional operations in Antigua, and within hours of the news of his arrest there was a run on his financial institutions, with locals seeking to immediately withdraw their savings. Subsequently, thousands of jobs held by Antiguans were affected—Stanford was the single biggest private investor in the islands—while the Stanford Victims Coalition (SVC) called for a tourism boycott of Antigua and Barbuda. The campaign calls on international travel professionals and investors to boycott hotels and resorts on the islands, cruises to Antigua, and investments in Antiguan financial institutions or in companies or ventures based in Antigua. In June 2009, Antigua and Barbuda fired its chief financial regulator, who was accused of accepting bribes from Stanford
The islands’ construction sector, which expanded its output in 2008 by 5.5%, came under pressure as the global financial crisis developed in late 2008 and FDI and tourism flows slumped. Beginning in the last quarter of 2008, construction of some tourism accommodation projects was slowed or placed on hold, owing to financing difficulties and sluggish sales. Tourism was already under pressure following the murder of a honeymoon couple from the United Kingdom in 2008.
Support for Inward Investment and Imports
Importers have to comply with the recently introduced Antigua and Barbuda Sales Tax regime (ABST), a major overhaul of the country’s sales tax structure. Further details are available on the government website.
There are various levels of tax exemptions from property tax for properties used for agriculture, and in the hotel and manufacturing sectors. Offshore banking in Antigua is protected by strict privacy laws and an offshore International Business Corporation (IBC) established in Antigua and Barbuda can enjoy a tax-exemption period of 50 years, creating a secure, well-legislated, offshore jurisdiction.
GDP growth: −6.5% (IMF, 2009 est.)
GDP per capita: US$18,100 (2009 est.)
CPI: 1.5% (2007)
Key interest rate: 10.43% (commercial bank prime rate, 2009 est.)
Exchange rate versus US dollar: EC$2.7 (fixed)*
Unemployment: 11% (2009 est.)
Current account deficit/surplus: −US$211 million (2007 est.)
Population: 86,754 (July 2010 est.)
* East Caribbean dollar
Source: CIA World Factbook except where stated