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Fri 8th Mar 2019

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Massive trade deficits show that the ULP regime is incompetent

According to Warrant Officer Ivan O’Neal BSc(hons), MSc, MBA, Leader of SVG Green Party, the big trade deficits are a significant warning to our country and the international community that the ULP regime is incompetent and the SVG economy is in serious trouble.

A trade deficit exists when a country spends more money annually on imports than it receives from its exports. The table shows the trade deficits for SVG since 2014, but SVG has had trade deficits for a longer time than that.

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(Source: SVG Stats office – Researched by Ivan O’Neal BSc(hons), MSc, MBA)

When a country persistently experiences trade deficits, there are negative consequences that can affect economic growth and stability. From 2014 to 2018, SVG has essentially exported about 800 million dollars a year to foreign countries.

People and businesses all over the country complain about ‘no money circulating the country’. The trade deficits show clearly why this is the case, as every year 800 million dollars of Vincentians money goes abroad. The ULP regime has set up the SVG economy so that Vincentians’ money supports foreign businesses much more than Vincentian businesses. A case in point is food.

Every year, SVG imports about 200 million dollars in food. The consequence – Vincentian farmers cannot sell their produce at market in SVG and go home with few dollars in their pocket. In the long-term, we see a significant loss of income for Vincentian farmers as the ULP regime’s economic set up of SVG means our money goes to farmers abroad.

Since we import so much more than we export, domestic jobs are lost to those abroad. This means unemployment increases in SVG, but decreases in the economic sectors in foreign countries that our 800 million dollar trade deficit goes to.

A trade deficit means that a country must rely on borrowing money to make up the difference. We see this in SVG, as the government is highly indebted, with a debt to GDP (Gross Domestic Product) ratio of about 70 per cent or more.

Having a trade deficit often means government needs to run a surplus on the financial/capital account. This means foreigners have an increasing claim on our assets. We see this in SVG with the selling of crown lands and other significant loss of our land to foreigners.

Economic theory suggests that persistent trade deficits will be detrimental to a nation's economic outlook by negatively impacting employment, growth and devaluing its currency. This often means the economy is uncompetitive and the exchange rate relatively overvalued - a real problem for countries who cannot devalue to restore competitiveness. This is SVG exactly.

One of the sad things about SVG’s massive and long-term trade deficits is that it is unnecessary. It is mainly the ULP regime’s economic set up of SVG that is causing the massive trade deficits and the loss of 800 million dollars a year – and the knock-on negative consequences of low sales for businesses, high unemployment and low economic activity. This economic strategy is damaging our children’s future.

The SVG economy is getting worse year by year and putting a lot of pressure on poor families. Many cannot feed their children and send them to school. The ULP regime is an economic disaster.

A Green government would modernise and re-orientate SVG’s economic set up and focus more on exports. We would set up a manufacturing economic sector in SVG and provide free education to university and targeted skills training to create a vibrant, exporting service sector.

Warrant Officer Ivan O’Neal BSc (hons), MSc, MBA believes that this would significantly reduce the trade deficit and consequently, reduce unemployment, increase business sales and boost economic growth and activity in SVG.

SVG must significantly reduce its trade deficit to bring prosperity to the people and businesses of SVG.

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