The Economy of Antigua and Barbuda Forges Ahead

With a per capita GDP of approximately $10,300, Antigua and Barbuda is one of the richest nations in the Americas. The twin-island state has a history of fast growth and tremendous financial buoyancy.

The economy of Antigua and Barbuda began with agriculture, particularly sugar. After the demise of traditional sugar cane plantations, due to the introduction of beet sugar, Antigua and Barbuda demonstrated its flexibility by switching its focus to tourism in the 1960’s.

Tourism made rapid development from its infancy to a full sector so that by the 1970’s tourism had become the mainstay of the Antiguan economy. Driven by the tourism boom and fueled by direct investment, the country’s average growth rate during the 1970’s and 1980’s was an impressive 6.5%.

Economic growth slowed during the 1990’s and by 2004 the Antiguan people were ready to change the ruling party that had been in control of the country since 1960. This election was a milestone for the country.

The Minister of Finance and the Economy, the Honorable Dr. Errol Cort and the new Administration, stepped into power after the economy of Antigua and Barbuda had suffered several hard blows. Four large hurricanes during the 1990’s caused damage to the infrastructure and tourism visits fell sharply following the terrorist attacks of September 11, 2001. The decrease in the numbers of tourists during the first few years of the 21st century slowed the economy and pressed the government into a tight fiscal corner. "Tourism in Antigua and Barbuda was affected by some natural disasters, a global recession in the 1990’s and the aftermath of 9/11. The world’s tourism market was seriously injured by the events of 9/11, but tourism was such a dominant part of our economy that we were more greatly affected," said Ted Isaac, chairman of the Antigua and Barbuda Hotel Association. The effect on tourism can be seen in the hotel industry, "between 1994 and 2004 we had a net decrease in rooms of 4% over the ten year period. We lost more rooms than we built," said Hon. Harold Lovell, Minister of Tourism and Civil Aviation. Since assuming office, the United Progressive Party (UPP) government has been on a mission to return normalcy to fiscal management, to enhance accountability, and to promote high and sustainable economic growth.

Although, the Honorable Dr. Cort has the large task of improving the business environment, curbing the fiscal imbalances, and reducing vulnerabilities—he is coming out ahead and the future of Antigua and Barbuda is a bright one. The economy of the dual-island nation has bounced back and is experiencing robust real economic growth. In fact, in 2006, the Antigua and Barbuda economy is estimated to have grown at a rate of 11.5 percent.

It was not just the ebb and flow of the tourism industry that dictated the economic and financial situation in Antigua and Barbuda; since the election of the UPP to government in March 2004, there has been a significant turnaround in fiscal performance. The Government has been able to take back control of the financial position and in response the nation’s overall fiscal deficit has fallen from 9.5% of GDP in 2003 to an estimated 6.6% in 2006. In addition, the Government was very effective in reducing the debt burden from over 140% of GDP in 2003 to an estimated 110% in 2006. The Government is very pleased with its results to date and is further emboldened to stay the course and continue the efforts to transform the economy of this twin-island state.

The Government gained control of the fiscal situation by reducing the deficit. This was achieved through a the establishment of a more efficient tax system and rationalizing expenditure. "We have worked to create macro-economic and social reforms and have introduced fiscal consolidation," said Dr. Cort. The Government has also set up a program of legal reform, established a priority public sector investment program, and established an environment in which the private sector can flourish. "My Government’s goal is to increase Antigua and Barbuda’s attractiveness as a place to do business.

The bases of our plan are strong governance and complete transparency. Connected with this are ongoing efforts to diversify, reduce economic vulnerabilities, eliminate barriers to competitive global trade and investment, increase competitiveness in the private sector, improve domestic employment, and enhance our capacity for sustainable growth in the face of external circumstances," said Dr. Cort. The Government has created an Investment Code that redefines the investment climate in Antigua and Barbuda. "We have strengthened the regulatory machinery for financial institutions and increased the enforcement of the prosecution of financial crimes…investors can rest assured that we comply with all international best practices. We are in a privileged position of offering investors many benefits in a secure environment. We have laid the foundation for foreign direct investment and welcome it," said Dr. Cort.

The Honorable Dr. Cort’s plan for 2007 will be an emphasis on expanding financial services in Antigua and Barbuda. "We see financial services as offering great hope for true economic diversification. We recognize that we are living in a global world; a world where trade preferences are a thing of the past," said Dr. Cort. In order to compete, the Government is looking to create services that excel both in the domestic market and in the international one. "This means that it is absolutely necessary for companies to identify areas in which they believe they have some comparative advantage and to explore those areas fully. We believe we don’t have comparable advantages in agriculture or manufacturing, but in terms of human capacity, we know that we can stand shoulder to shoulder in the world," said Dr. Cort.

Dr. Cort’s vision gets translated into the financial services sector, where the Government is on a quest to develop that whole industry. Significant emphasis is being put on creating an environment for the promotion of investment and private sector development. As part of the financial services platform, the Government has set into action the Antigua and Barbuda Investment Authority that was created by legislation. "This Authority will act as a one stop shop for investors and will promote direct investment, local as well as foreign," said Dr. Cort.

The Antigua and Barbuda Investment Authority, which began operations on March 1, 2007, coordinates the processes related to investment proposals and assists in expediting official approvals. It also works to foster a transparent, ethical, productive and profitable business environment in Antigua and Barbuda. "As part of the Investment Authority we will have a promotional arm that will promote investments in Antigua and Barbuda. We will use that arm to promote financial services as well as tourism and other investment opportunities but financial services will be a key component," explained Dr. Cort.

That is not to say that tourism has been put aside, "because of the natural strengths of the island, we feel that tourism will always be a major part of Antigua and Barbuda," said Dr. Cort.

The growth in tourism in Antigua and Barbuda has been outstanding. A significant number of hotel projects, valued at over $800 million will increase the room stock in Antigua and Barbuda by over 30%. And the Cricket World Cup is expected to generate significant economic activity not only in tourism, where the sector is projected to grow by 25% for 2007, but also in infrastructure developments. "The Cricket World Cup has provoked the building of a new stadium, road improvements, and an upgrade of the airport. We feel that the positive impacts on the infrastructure of the country are immeasurable," said Dr. Cort.

The major opportunities for the country’s future, as seen by Minister Cort, are within the service sector. "Given our relatively smaller manufacturing and agricultural base, we rely on advancements in ICT’s and services for economic growth," said Dr. Cort. "We will therefore be seeking to expand our presence in Internet gaming. We are committed to controlling and regulating that sector in order to provide employment opportunities for our population and help with the diversification of the economy." Minister Cort went on to explain that though the economy is "small, vulnerable, and highly open and despite the major challenges with which it has had to grapple, Antigua and Barbuda has been and will remain resilient. We envision strong and positive macroeconomic outcomes over the medium term and project that the economy will grow at an average rate of between 5 and 6% from 2007 to 2012." The Government intends to continue its efforts to promote private