The Organisation of Eastern Caribbean States (OECS) comprises a diverse set of small and open island countries that are highly prone to natural disasters, including: Antigua and Barbuda, Dominica, Grenada, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines. Because of limited economies of scale due to their small size, they also tend to specialize in a few products and services, and are not very diversified. These economies rely extensively on tourism and to a lesser extent agriculture, and are dependent on external markets for food and fuel imports. The countries also receive high worker remittances inflows. As a result, they are subject to excessive terms of trade volatility. Despite high human development indices, OECS have not succeeded in reducing poverty to levels compatible with their level of per capita income. Unemployment, especially among women and youth, remains high, which also contributes to high emigration rates.
The impact of the 2008 global financial crisis was severe and led to a deep and extended recession in the region, as tourism, remittances, and financial activity decreased sharply, labor market conditions deteriorated, and debt and fiscal imbalances increased to high levels with heavy public borrowing to support growth and to respond to natural disasters that they also faced. The subsequent economic recovery which began to take hold in 2013 in the region was supported by strengthened tourism and construction activity, as well as a recovery in foreign direct investment flows, and to a lesser extent the region’s flagship citizenship by investment programs (CBI). Real GDP growth in the Eastern Caribbean is estimated to have eased to 2.4 percent in 2016, partly due to lower returns in the tourism and construction sectors. Tourist arrivals to the OECS reduced slightly, reflecting a contraction in cruise ship and airport arrivals from the United Kingdom and Canada. This was tempered by increased airport arrivals from the United States. Construction activity has also slowed down partly due to reduced citizenship by investment inflows in most countries.
At country level, we observe divergent growth performance: Grenada experienced a deep contraction in agricultural production due to a severe drought, reaching a 3.9 percent growth; Saint Lucia and Antigua and Barbuda posted a less pronounced deceleration in growth, given tepid tourism activity. In contrast, Dominica experienced a 3.3 percentage point recovery to 1.5 percent growth in 2016, mainly driven by reconstruction activities following the devastation of Tropical storm Erika. St Vincent and the Grenadines also experiencing a rebound with the construction of the newly completed international airport, GDP growth expanded to 1.8 percent.
Economic growth for the OECS region is expected to firm slightly to an average of 2.5 percent during 2017-2019. In particular, this reflects a projected rebound in growth in St. Vincent and the Grenadines, and Dominica, as they continue to recover from severe disasters, and in Antigua and Barbuda, assuming it pursues its fiscal reforms.
Last Updated: Apr 10, 2017