Working Paper Series: Special Edition of 2016 to 2018 Interns

Figure 3: Cumulative Cost of Damages (EC$) over the period 1980-2016

- 0.50 1.00 1.50 2.00 2.50

Billions

Source: EM-DAT and Country Reports

Small Island Developing States (SIDS) such as the ECCU are considered the most vulnerable and least equipped to deal with the effects of natural disasters. The economies of the Eastern Caribbean are highly undiversified and are heavily reliant on one or two sectors of the economy such as the tourism industry and the agricultural sector. This undiversified nature of the economies means that a single adverse shock to a key sector can negatively impact growth. In addition to natural disasters, the countries are susceptible to oil price shocks and world interest rate fluctuations, particularly due to the high degree of openness and the dependence on external markets for key imports and foreign direct investment. Moreover, the ECCU countries are heavily reliant on foreign sources to finance costs incurred in the aftermath of natural disasters. 2.4 Debt in the ECCU Over the years, all of the independent countries of the ECCU have accumulated high levels of debt. With the exception of the dependent territories: Anguilla and Montserrat, each country has surpassed the 60 per cent debt to GDP prudential. However, the member countries have agreed to achieve the stated target by the year 2030. In 2005, St Kitts and Nevis recorded an exceedingly high public debt to GDP ratio of 152 per cent but has since been on a downward trajectory.

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