The Country Poverty Assessment conducted in early 2000’s did identify poverty and indigence, however, it was not alarming by the standards of the Commonwealth Caribbean. While it might have been accepted in official circles that there were problems of living conditions for some sections of the population, it would have been easy to come to the view that in conditions of rapid increases in economic activity and over-full employment for mostAnguillans, any poverty problem could be easily defeated. Indeed, the CPA conducted in 2007/09, suggests that poverty could have fallen and indigence had been overcome: there was no one so poor that health was being threatened by lack of resources for basic nutrition.- The Anguilla Country Poverty Assessment, 2007-2009.
Economic Situation Analysis
As an island with few natural resources, Anguilla relies heavily on tourism, offshore banking, and remittances from emigrants.
After years of poor growth performance starting with a hurricane in 2000 (causing Anguilla's economy to decline by 0.3% during that year), the economy saw strong positive growth in the years 2004-2007. The Caribbean Development Bank reports that the growth in GDP in 2007 was at a healthy 12 %. However Anguilla was hit hard by the recent financial downturn, leading to a growth rate in 2008 at only 3.78 %. The overall deficit for 2009 was at approximately EC$80.42 million, and fiscal reserves virtually at zero at the end of 2009.
Anguilla's reliance on the tourism sector increases its dependence on income growth in the industrialized nations as well as on favorable weather conditions. In 2002, Anguilla's 3.2% economic decline was directly influenced by the economic downturn in the United States, the island's main tourist market. A boost in the island's tourism industry from 2004 onwards led to record levels of visitors, with 5.2% more visitors in 2007 compared to 2006. A 2001 study of Anguilla's tourism sector revealed that the industry contributed approximately 50% to 60%of the island's GDP.
A decline in tourism activity over recent years has seen the Hotel and Restaurant sector move from the number one to the number 2 spot in contribution to GDP (24.56 %). The number one sector contributing to GDP in 2009 was the Banking and insurance Sector, representing 27.3 % of GPD. In 2008 the construction sector was the largest contributor to GDP, but this sector saw a decline over 58.87 % in 2009 due to financial crisis. In addition to this, the spike in fuel prices in 2008 led to a large increase in capital expenditures on the import-dependent island.
In the medium term, prospects for the economy will depend largely on the tourism sector. Anguillan officials have also put substantial effort into developing the offshore financial sector, which is small, but growing. Anguilla will need to address long-term social development concerns in the areas of fiscal stability, pro-poor policies, environmental degradation due to increased tourism and clean energy and energy security.
Challenges and Policy Issues
In terms of development cooperation, the UK plans to halt all technical assistance grants. As an overseas territory of the UK, Anguilla has relied heavily on the UK for financial assistance. The Government of Anguilla has severely limited public financing and plans to upgrade the physical and economic infrastructure through deficit financing. Because Anguilla will struggle to meet the financial demands of expanding the airport and roads for tourism, Anguilla will struggle to meet social development demands. The government will need to work toward sustainable public financing by strengthening tax collection and possibly implementing a new tax.
Regional projects of direct interest to Anguilla include: the Caribbean Export Development Agency (CEDA) which provides technical assistance and training for export manufacturers in the OECS countries and in Anguilla; under the ASYCUDA project, designed to improve customs collection, computer equipment was installed at the customs offices in Anguilla; the Caribbean Regional Tourism Development Programmes aim to assist ACP States and OCTs to achieve sustainable growth in their tourism operations. The programme, to which EUR 9 million has been allocated, falls into two main areas of activity, market development in Europe and product development in the Caribbean. Anguilla has particularly benefited from technical assistance measures for the development of a marketing plan.
Under the 9th EDF, an allocation of EUR 7.9 million has been agreed. Programming for this amount is currently underway. Social, environmental and financial aspects are to be accorded increased emphasis under this programming period. Anguilla is also covered under the OCTs Regional Risk Reduction Initiative (R3i).
The major policy issues for the Government at this juncture are:
- Restructuring public debt
- Poverty reduction
- energy sustainability
Anguilla is heavily dependent on external factors. The Government of Anguilla will need to sustain a high rate of growth and maintain a high standard of living for its citizens. The Government will need to increase public sector savings levels. The Government of Anguilla will also have to brace itself for possible postponement of projects for which financing may not be available in the near to medium term. Anguilla has completed a National Energy Policy addressing a transition to clean energy, and will need to take further steps towards making this plan a reality.