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Quick Facts
- Population:
- GDP (PPP):
- $1.2 billion
- 1.6% growth
- 1.3% 5-year compound annual growth
- $11,270 per capita
- Unemployment:
- Inflation (CPI):
- FDI Inflow:
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Saint Vincent and the Grenadines’ economic freedom score is 67.7, making its economy the 49th freest in the 2018 Index. Its overall score has increased by 2.5 points, with significant improvements in fiscal health and monetary freedom far outpacing a decline in investment freedom. Saint Vincent and the Grenadines is ranked 8th among 32 countries in the Americas region, and its overall score is above the regional and world averages.
Saint Vincent and the Grenadines’ economy depends on agriculture, tourism, construction, remittances, and a small offshore banking sector. Many of the fundamentals for greater economic freedom, such as flexible regulations, an efficient legal system that secures private property, and macroeconomic stability, are in place. Greater access to private financing and more openness to trade and international investment would improve the business climate. Fiscal policy is constrained by rising public debt and an uncompetitive tax regime.
Background
Situated in the Windward Islands in the Lesser Antilles, Saint Vincent and the Grenadines gained independence from the U.K. and became a parliamentary democracy in 1979. Prime Minister Ralph Gonsalves of the center-left Unity Labour Party, in office since 2001 and reelected to a fourth term in 2015, will not face voters again until 2020. Exports benefit from the Caribbean Basin Initiative, which provides duty-free access to the U.S. market. Agriculture and tourism employ a significant portion of the workforce. The economy is vulnerable to global price fluctuations and natural disasters but has shown signs of recovery due to falling oil prices, renewed growth in construction, and hopes for increased tourism with the opening of a new international airport in 2017.
Saint Vincent and the Grenadines has a legislative framework based on the British common law system to protect property rights and enforce contracts, but enforcement of intellectual property rights is generally weak. In comparison with some of its neighbors, its judiciary is independent, the rule of law remains strong, and corruption is not pervasive, although drug-related money laundering has been a problem.
The top personal income tax rate is 32.5 percent, and the corporate tax rate is 33 percent. Other taxes include property and value-added taxes. The overall tax burden equals 24.2 percent of total domestic income. Over the past three years, government spending has amounted to 30.1 percent of total output (GDP), and budget deficits have averaged 1.6 percent of GDP. Public debt is equivalent to 79.2 percent of GDP.
The accounting, legal, and regulatory framework is generally transparent and consistent with international norms, facilitating the operation of private businesses. A new Occupational Safety and Health Bill was introduced in 2016. Subsidies and transfers to state-owned enterprises in the current period amount to more than 3 percent of GDP.
Trade is significant for the economy of Saint Vincent and the Grenadines; the combined value of exports and imports equals 77 percent of GDP. The average applied tariff rate is 7.2 percent. Nontariff barriers impede some trade. Government openness to foreign investment is below average. The developing financial system is dominated by banks. Credit access has been expanding slowly, but the number of nonperforming loans is rising.