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Quick Facts
- Population:
- GDP (PPP):
- $1.3 billion
- 1.0% growth
- 1.1% 5-year compound annual growth
- $11,491 per capita
- Unemployment:
- Inflation (CPI):
- FDI Inflow:
Saint Vincent and the Grenadines’ economic freedom score is 65.8, making its economy the 55th freest in the 2019 Index. Its overall score has decreased by 1.9 points, with declines in judicial effectiveness, trade freedom, monetary freedom, and business freedom outweighing improved scores for fiscal health and government spending. Saint Vincent and the Grenadines is ranked 10th 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 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. The economy was negatively affected by U.S. economic sanctions imposed on Venezuela in 2018.
Background
Situated in the Windward Islands of the Lesser Antilles, Saint Vincent and the Grenadines gained full independence from the United Kingdom as 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. Although the economy remains vulnerable to global price fluctuations and natural disasters, it showed signs of recovery in 2018 as a result of renewed growth in construction and increased tourist arrivals at the country’s new international airport.
Saint Vincent and the Grenadines’ relatively independent and efficient judicial system, based on English common law, protects property rights and enforces contracts. Intellectual property rights are recognized, although enforcement of IPR laws is considered weak. In comparison with some of its neighbors, the rule of law remains strong, and corruption is not pervasive. However, the operation of anticorruption institutions is usually slow.
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 27.1 percent of total domestic income. Over the past three years, government spending has amounted to 29.3 percent of the country’s output (GDP), and budget deficits have averaged 1.1 percent of GDP. Public debt is equivalent to 80.8 percent of GDP.
The formation and operation of a private enterprise are not burdened by excessive government interference, and enforcement of commercial regulations is relatively effective. Much of the labor force is employed in the agricultural and tourism sectors. The nonsalary cost of employing a worker is moderate. Reducing subsidies and transfers to state-owned enterprises could save more than 3 percent of GDP.
The combined value of exports and imports is equal to 78 percent of GDP. The average applied tariff rate is 9.2 percent, and nontariff barriers further undermine overall trade freedom. In general, foreign and domestic investors are treated equally under the law, but the government screens foreign investment. Businesses lack adequate access to a wide variety of financing instruments, and the capital market is underdeveloped.