By Caribbean News Global
NEW YORK, USA – AM BEST country risk report dated August 20, 2020, features Saint Lucia, as Tier 3 (CRT-3) moderate level, reflective of AM Best’s assessment of three categories of risk: economic, political, and financial system risk.
“Saint Lucia, a CRT-3 country, has moderate levels of economic and political risk and a high level of financial system risk. It is a member of the Commonwealth of Nations, with a parliamentary democracy. It is also a member of the Eastern Caribbean Currency Union (ECCU).
“GDP grew was 1.7 percent in 2019 and is expected to contract by 8.5 percent in 2020. Economic growth depends on the tourism industry and on whether the country can improve its competitiveness,” the reports said.
AM BEST country risk report states that Saint Lucia’s economic risk is moderate: “Tourism, financial services, and agriculture are the main industries, with tourism accounting for over 60 percent of GDP. Saint Lucia used to be the region’s leading destination but faces rising competition. High crime rates and a high tax on international visitors could dampen the sector’s growth. Growing cruise capacity and hotel expansion have led to growth in the construction sector as well as tourism. However, the country is vulnerable to severe weather events and changes to global demand conditions owing to COVID-19.
“The country entered into a Rapid Credit Facility (RCI) with the IMF for USD$29.2 million, to be used to mitigate the impact of COVID-19. The economy relies highly on imports, especially energy imports, which increases the country’s vulnerability to global oil price fluctuations.”
Saint Lucia’s political risk is reported as moderate: “Prime minister Allen Chastanet and the United Workers Party (UWP) maintain control of the government. His party currently holds 11 of the 17 seats in the House Assembly. Opposition leader Philip Pierre of the Saint Lucia Labour Party (SLP) has organized a number of peaceful protests in advance of the 2021 election.
“Growing poverty and social inequality, rising crime, and a high unemployment rate are concerns for the government. However, the main issues are diversifying the economy, as both the agricultural and tourism sectors are vulnerable to weather shocks, and reducing its debt burden. To raise revenue, the government has begun to collect Citizenship by Investment proceeds in the sovereign wealth fund, to diminish its reliance on volatile revenues. In the World Bank’s most recent Ease of Doing Business survey, Saint Lucia ranked 93rd out of 190 countries. The island scores poorly on obtaining credit, resolving insolvency, and registering property but relatively well on dealing with construction permits and getting electricity.”
Saint Lucia’s financial system risk is rated high: “The Financial Services Regulatory Authority regulates Saint Lucia’s insurance market and handles all of the licensing, registration, supervision, and regulation of domestic, offshore, and captive insurers. As a member of the ECCU, Saint Lucia has access to the reserves of the Eastern Caribbean Central Bank, which provides an important buffer for the vulnerable economy. Financial sector weakness persists, as non-performing loans remain elevated. According to the IMF, non- performing loans remain above ten percent, which has affected the banking’s sector profitability.”