Caribbean states fight to ride out economic storm

By Pascal Fletcher

BASSETERRE, St. Kitts (Reuters) - The Caribbean's small island states ride out hurricanes year after year, but they are fighting to stay afloat in a global economic storm that is battering rich and poor nations alike.

Tiny nations like twin-island St. Kitts and Nevis, a short chain of lush green volcanic cones set in an azure sea, have felt the shocks of the downturn and credit crunch as keenly as the winds and seas that lash them every summer.

Their high dependence on tourism, remittances, investment flows, imports and commodity prices makes than all the more vulnerable to recent worldwide economic tremors that have shaken giants like the United States and China.

Shock has followed shock. First, soaring oil prices last year pushed up energy and food import bills and swelled inflation. Then, recession in the United States and Europe cut tourism and investment flows.

The International Monetary Fund forecasts real 2009 GDP for the eight-member Eastern Caribbean Currency Union (ECCU), which includes St. Kitts and Nevis, will contract by 2.5 percent "reflecting a sharply-slowing global economy, declining tourist arrivals and foreign direct investment flows, and increased financial sector stresses."

"It's been difficult, it's not without pain, and we have gotten wet," said Richard Skerritt, St. Kitts and Nevis' Tourism Minister, citing a 12 percent January-April drop in visitors from the United States.

Since the local sugar industry closed in 2005, tourism has taken over from "King Sugar" as the economic mainstay on the twin-island state of 40,000 people and now contributes an estimated 40 percent of gross domestic product.

Any dip in visitor activity is painful. The January-April visitor fall-off forced the country's biggest resort, the St. Kitts Marriott, to lay off 100 employees.

"That was a shock, because in a small country, lay-offs hurt everybody," Skerritt said.

Nature too has taken its toll on the former British territory. Hurricane Omar, which pummeled St. Kitts and Nevis last year, forced the closure in October of the Four Seasons, the biggest resort on Nevis, which has still not reopened.

"WEATHERING THE STORM"

To the east, Antigua and Barbuda's hotels suffered a 30 percent decrease in occupancy and government revenue fell by 25 percent, Antigua Prime Minister Baldwin Spencer said.

St. Kitts' Skerritt said his government was fighting back. It had removed some duties and taxes to shield consumers from price rises in basic food, introduced stimulus measures for small hotels and negotiated hard with airlines and big resort operators to try to keep visitors coming.

"We are weathering the storm better than most," Skerritt told Reuters. St. Kitts was banking on the Christophe Harbour project, a big new hotel, marina and golf course development on its southeast peninsula, to attract new visitors.

Skerritt said the new resort was already impacting the local economy and had created some 100 new jobs.