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. However, as the two islands are highly dependent on tourism, with US tourists constituting one-third of all visitors, the global downturn promises to create difficult times for Antigua through 2009. 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. The islands have a thriving tax-haven business due to the favorable regulations for offshore banking.
Economic Policy over 12 Months
The Antigua and Barbuda Budget Statements set the year’s policy agenda. They demonstrate, in fine detail, just how conscious the dual-island nation’s present government is of the fact that Antigua and Barbuda’s economic fortunes are inextricably tied to the fortunes of the developed nations. Anything that has an impact on the tourist trade, from higher oil prices which drive up aviation fuel costs and make travel more expensive, to the 2008–2009 global economic downturn, which predisposes consumers to forego expensive, exotic holidays on Caribbean islands, hits the country’s economy hard.
The government has been 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 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 13 June 2008. Caribbean nationals who have obtained Caribbean Vocational Qualifications (CVQ) are free to move about the region.
In the 2009 Budget Statement, the plight of those islanders in the lower economic categories in the face of these twin price surges, was noted, and some promise of additional help for the poorest was sketched out. Again, falling tourism revenues will not make that kind of promise easy to meet. The government has signed an Economic Partnership Agreement with the European Union, and has pushed particularly for technical and financial assistance for the nation’s priority programs of housing, education, and manufacture. Antigua and Barbuda receive support from the European Union’s 9th Economic Development Fund, amounting to some €6.3 million in 2007–2008.
The country’s tax-exempt offshore banking laws and good legislative framework have created a thriving, offshore tax-haven industry. Offshore banks require a minimum paid-up capital of US$5 million, and are not subject to the reserve requirements imposed on local banks by the Antigua Banking Act.
Antigua and Barbadu have a “Digital Agenda,” recognizing that computer and Internet access is a cornerstone of economic growth in the modern era. As the government said in its 2009 Budget, “The world markets increasingly demand a highly skilled, digitally minded workforce and the government has spent US$26 million over the last four years implementing increased access to computer technology in schools and communities.”
Economic Performance over 12 Months
Economic growth in the Caribbean region slowed in 2007, following an outstanding period of growth in 2006, which achieved 8.4% year-on-year growth. This fell to 6% for the region as a whole in 2007 and to around 4% for 2008. With the ECCU economies cooling at the tail end of 2007 and throughout 2008, most sectors of the Antigua and Barbuda economy felt the chill. While the country still expects to see some growth, rather than the contraction experienced in many Western economies, that growth will be around 1–2% in 2009. The government expects the construction sector to provide much of the impetus for this growth, with some support from other sectors. Tourism, however, is expected to contract.
The country went into 2008 expecting a global trend growth of around 4.8%, or just marginally less than the 5.5% global growth average of 2006. In point of fact, by the end of 2008 it found itself staring at recession in a number of the countries that constitute its primary sources of tourist revenue. Even worse, the islands were hit very hard by extreme volatility in both the price of oil, and the price of many basic foods.
The islands’ construction sector expanded its output in 2008 by 5.5%, with reasonable demand in both the private and public sectors. Tourism grew by 4.0% in 2008, and by 4.9% in 2007. However, a marked downturn in the last three months of 2008, particularly from the European Union, bodes ill for any prospect of growth in 2009. The industry was also hit by a downturn in the number of cruise ships calling at the islands (46 fewer in 2008 than in 2007), with the fall-off coming from cruise lines paring their destination portfolios in response to the high cost of oil. With oil prices back to a potential average of US$45 per barrel for 2009, that reason at least might vanish, though diminished household surpluses in the major Western economies and in Asia are expected to have an adverse impact on the number of visitors seeking Caribbean holidays.
Online gaming, which already has a presence on the island targeting the US consumer base, received a boost with the United Kingdom including the island-nation on its whitelist of online gaming countries, in accordance with Section 331 of the United Kingdom Gambling Act 2005. The effective date of the whitelisting was 21 November 2008. To make the whitelist, Antigua had to be able to show that it had the appropriate regulatory framework in place with regard to the exclusion of criminal involvement (including money laundering and the financing of terrorism). The move is seen as significant because it allows the country’s existing gaming and interactive wagering companies to expand their base from the United States to the United Kingdom, and ultimately to Europe.
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.
Tax Exemptions
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 IBC established in Antigua and Barbuda can enjoy a tax-exemption period of 50 years, creating a secure, well-legislated offshore jurisdiction.
Statistics
GDP growth: 2.1% (2008, est.)
GDP per capita: US$19,100 (2008, est.)
CPI: 1.5% (2007)
Key interest rate: 10.44% (commercial bank prime rate)
Exchange rate versus dollar: East Caribbean dollar per US dollar—2.7(fixed)
Unemployment: 11%
FDI: N/A
Current account deficit/surplus: −US$211 million (2007, est.)
Population: 84,522
Source: CIA World Factbook except where stated
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