Harold Lovell seeks to add context to claims of economic growth

The content originally appeared on: Antigua News Room

Letters to the Editor: Harold Lovell seeks to add context to claims of economic growth

Dear Editor,

My friend Professor Justin Robinson, Pro Vice-Chancellor and Campus Principal at the UWI Five Islands, appeared on a local radio programme last Saturday and made several interesting comments.

Let me state from the outset that I agree with most of what he said. The purpose of this letter is not to respond in the way of rebuttal, but rather for expansion and addition.

First, I agree with Professor Robinson that for any economy, growth must be a priority. However, I wish to add that inflation must also be treated as a priority.

We can all agree that much of our inflation is imported, and the policy options in this regard are limited. One that the government would, however, be the ways in which the consumption tax is levied.

The administration did the exact opposite by increasing the ABST from 15% to 17%. It was brutal and uncaring. It was a bad decision. What the ABLP government has done is to reduce the purchasing power of working-class people in particular. That is why so many people are crying out about the cost of living whereas, so few are celebrating the nominal economic growth.

I agree with Professor Robinson when he said that the government should be broadening the taxes that are on the books.

The Prime Minister acknowledged in his 2024 Budget Statement that the ABST compliance rate is a low 50%. Put another way, the government is collecting only 50 cents for every $1.00 that it should be collecting.

In 2022, the amount of ABST that the government collected is approximately $300 million which means that someone was due to have another $300 million uncollected.

Tax waivers are not random when they are not guided. It is “who you know” as the saying goes, but that is a huge problem.

Another important point raised by Professor Robinson is the resilience of Antigua and Barbuda’s economy which is based on tourism. He noted that for 38 out of 46 years from 1978 to 2023 we experienced positive economic growth.

This is a factual statement with one minor error. He said that we experienced recession in 2005 when in fact, we achieved growth of 6.47%. Also, he did not mention the decline in 2001 of -4.55%.

It is important to note that the highest growth figure between 1978 and 2023 is 12.71% recorded in 2006, followed by growth of 9.32% in 2007. This was a period of unprecedented hotel construction and expansion in Antigua.

We saw the construction of Sandals Grande, Verandah, Hermitage, Sugar Ridge, and the partial construction of the Hodges Bay Club.

Expansion took place at Galley Bay, Jumba Bay, Blue Waters, St James Club and others. In addition, 41 new guest houses and small hotel properties were opened during this period. Our hotel room stock grew by approximately 40% from 3000 rooms to 4154 rooms.

The Sir Vivian Richards Stadium was also constructed during this period and there was a boom in private home construction.

By 2009, the situation changed dramatically. Wall Street was in crisis as the effect of the financial meltdown led to a lack of confidence globally and investment in tourism worldwide declined by 9.0%.

Not only did we have to cope with the global economic crisis like everyone else, but we also had to face the crash of our largest private sector investor in Stanford or Allen Stanford.

On February 17th 2009, federal agents raided the offices of Stanford Financial in Houston, Texas. The impact on Antigua and Barbuda was instant. All of Stanford’s assets were frozen, and in Antigua alone over 2,500 jobs were lost. The effect on the economy was unprecedented and unparalleled.

A team of international and local economists did an assessment of the impact on the economy and found that we suffered a loss in value of approximately EC$400 million. That was a massive blow to our economy which at the time had a GDP of just under 4 billion dollars.

In addition to the global economic crisis, and the sudden demise of the Stanford empire, we also saw the crash of The Trinidad-based CLICO/British American group of companies which caused local depositors and investors in Antigua and Barbuda to lose EC$288 million.

The resilience within our economy was again evident as the economy rebounded in 2012 followed by a minor dip of 0.6% in 2013.

Our biggest single decline in one year occurred in 2020, when the economy fell by 17% due to the Covid pandemic.

The moral of the story is that we have an open economy which is highly vulnerable to external shocks. The pattern is clear. For example, 1995 (Hurricane Luis), 2001 (9/11 terrorist attack in New York), 2007-2011 (Global crisis, plus Stanford, plus CLICO), 2020 (Covid).

In conclusion, the points made by Professor Robinson are all valid. However, there are persons who, as a result of ignorance or with malicious intent, have sought to twist the unvarnished points for cheap political gain.

In this letter I have sought to add some context and to set the record straight.

Yours truly,Harold Lovell

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