Formed from volcanic activity with high lava ridges and craters, St Lucia has a landmass of 238 sq miles, making it the second largest nation of the Windward group in the Lesser Antilles. The tropical eastern Caribbean island boasts beaches, tropical rain forest, mountains, and the Qualibou volcano with its boiling sulphur springs.
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As with most islands in the Caribbean, St Lucia is a small open economy, highly vulnerable to external shocks such as natural disasters and foreign oil prices as well as highly dependent on its services sector, specifically tourism.
Prior to the COVID-19 outbreak, the St Lucian economy exhibited a combined 8% growth between 2016-2019. Unemployment decreased from 24.1% in 2015 to 16.8% in 2019, improving the income-generating ability of households and reducing poverty. The island managed to maintain a level of public debt below the regional average, with national indebtedness equivalent to 65.9% of GDP in 2019. The economy was forecasted to grow 3.2% in 2020, building on the 4 previous years of growth.
However, the pandemic caused a severe output reduction and a sharp surge in public debt. St Lucia recorded a very high economic contraction of 20.4% in 2020, and an increase in unemployment of almost 5%, with women and young workers most affected. The government tried to mitigate the impacts with temporary income support for three months, a suspension of mortgage payments and direct support to local indigenous farmers to sustain their livelihoods, among other initiatives.
This additional spending surged the debt to GDP ratio to 86.5% and pushed the debt service to above 15% of GDP. Resultingly, the government’s borrowing capacity to finance new projects and mitigate socio-economic vulnerabilities to external shocks and natural disasters is severely constrained.