Montserrat - Introduction
The country outline for Montserrat is aimed to offer a general overview of the Montserrat social and economic situation. It was prepared using inputs from the Caribbean Development Bank Annual Economic Report for the year 2003-2004, the CIA fact-book and World Bank Discussion Papers available online. The complete list of references is available in the sections named Bibliography and Sources on-line.
I. Social Analysis
In 2004, Montserrat registered high life expectancy for its total population at 78.53 years. 2004 data shows a mortality rate of 8.8 deaths per 1000 live births. [1] Additionally, Montserrat has the highest number of Tuberculosis cases in the Eastern Caribbean. Poverty remains a significant problem for the island. Additionally, the supply of housing is inadequate to meet the needs of the population.
Montserrat's rate of unemployment has remained steady at 13 % with the island's offshore medical school being its second largest employer.[2] Montserrat issues work permits to immigrant workers from other CARICOM countries to alleviate its shortage of labour.
II. Economic Situation analysis
a. Overview of the recent economic performance
As an overseas territory of the United Kingdom, Montserrat's fiscal policy is determined by the UK. UK Government assistance represented 63.8% of the Central Government's recurrent and capital expenditures in 2003.[3] Because the UK is currently phasing out its aid to Montserrat, Montserrat will have to grapple with its high dependence on external financing in the near to medium term. In 2002, Montserrat's population registered at 4,500 people.
2003 marked Montserrat's second year of growth since 1995 as a result of increased activity in the banking and insurance, real estate and housing, electricity and water and Government sectors. Montserrat's economy registered a real GDP growth rate of 1.2% in 2003 and a growth rate of 5.3% in 2002.[4] Severe volcanic activity, which began in July 1995, limits the potential growth of Montserrat's economy considerably. An eruption in June 1997 closed the airports and seaports and two-thirds of the 12,000 inhabitants fled the island. Some began to return in1998, but housing shortages restricted the number.
The agriculture sector continued to be affected by the lack of suitable land for farming and the destruction of crops. Prospects for the economy depend largely on developments in relation to the volcano and on public sector construction activity. In July 2003, ash falling from the Soufriere Hills Volcano damaged 95% of the crops that were on the ground.[5]
In 2002, the government of Montserrat took over the operation of the ferry and helicopter services that were previously financed directly by the UK government aid. Montserrat has also commenced work on a new airport that is projected to cost $20 million. Because inadequate transportation to and from Montserrat impedes the growth of the tourism industry, Montserrat has remained dedicated to finalizing this project as it will spur significant growth and provide further links to the international community.
b. Development Cooperation
The UK has launched a three-year $122.8 million aid program to help reconstruct the economy. The UK government has also provided an additional $4.5 million to fund the ash-cleaning programme.
The UK Government is also expected to provide $12.6 million for Montserrat's capital expenditure.[6] Other funding sources include the EU, the Republic of Ireland, the Pan American health Organization, and the UNDP. The funding aims to improve infrastructure and human resource development in order to facilitate private sector development. Economic activity in Montserrat is currently dominated by the public sector. The private sector is largely a provider of services to the public sector. Montserrat will need to promote growth of the private sector as well as growth in output and employment. However, the fact that half of the island is expected to remain uninhabitable for another decade remains a stumbling block for private sector growth.
III. Key Challenges
a. Overview
The major policy issues for the Government at this juncture are:
- Restructuring Public Debt
- Poverty Reduction
- Population Retention
- Resources Development
- Development Projects (Tourism and Others)
The size, composition and retention of population are key challenge that will affect opportunities for economic growth. The economy is also highly dependent on external financing. The island is also unable to accommodate its housing needs.
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[1] CIA Factbook http://www.cia.gov/cia/publications/factbook/geos/mh.html
[2] Caribbean Development Bank Annual Economic Review 2003, p.74
[3] Caribbean Development Bank Annual Economic Review 2003, p.76
[4] Caribbean Development Bank Annual Economic Review 2003, p.75
[5] Caribbean Development Bank Annual Economic Review 2003, p.74
[6] Caribbean Development Bank Annual Economic Review 2003, p.75
