Higher current spending late in the year reflected a substantial increase in relief and reconstruction activities. Offshore financial services have been a growing sector, especially in Nevis. The laws provide for a high degree of confidentiality and for income tax exemption. St. Kitts and Nevis has been concerned about strengthening the supervision of the offshore financial service sector, and the recent international initiatives against weak regulatory and supervisory practices in offshore financial centers have given further impetus to the authorities' efforts. The government has committed itself to developing the tourist industry as the linchpin of the economy in the future, with some diversification into light manufacturing, offshore financial services, and other services.
Inflation is likely to remain low.
The recent modest economic upturn has been accompanied by a further worsening of the fiscal situation. The authorities have recently taken strong measures to contain expenditures, including freezing civil service employment. Recent revenue measures include an increase in electricity and water tariffs, and a substantial increase in regulated retail gasoline prices. The government is currently deciding on the future of the sugar industry and a course of action to stem the industry's losses. Growth in service exports will begin to pick-up toward the end of the year.