“That’s why when we measure productivity we have to adjust for inflation. We have to discount the effect of inflation.”
Trade Advisor in the Ministry of Commerce, Dr. Thomas Samuel recently addressed the impact of inflation on national productivity and overall GDP. Saint Lucia saw a significant reduction in its inflation rate in 2023, with the rate dropping to 4.1% from 6.4% in 2022. This decrease was largely attributed to favorable global supply developments and lower commodity prices, which helped ease domestic inflationary pressures.
“Inflation is a rate. It’s not just an absolute increase. It’s a rate of change. So when we say inflation is trending downwards what we mean is that the rate of increase is slowing down which is really called disinflation.”
The 2023 Economic and Social Review highlights notable reductions in the Housing, Water, Electricity, Gas, and Other Fuels sectors, which experienced a 2.9% decline. However, Dr. Samuel cautioned that consumers should not expect an immediate reduction in the cost of goods and services.
“Generally in most economies, prices are sticky downwards. In other words, there is a sought of reluctance on the part of those who sell goods to voluntarily bring prices down unless it affects them. But, the markets usually have a correction and so they are either going to be priced out of the market and will see it in their interest to bring it down a bit. And, because more goods come onto the market there is more supply and supply catches up and corrects that imbalance that I eluded to earlier.”
The government’s efforts to stabilize the economy and support consumers through strategic policy measures have played a crucial role in managing inflation and fostering economic stability. Dr. Thecla Fitz-Lewis, President of the National Consumer Association of Saint Lucia, stated that inflation remains a real concern for all consumers. While acknowledging the government’s contributions to cushioning the impact of inflation, she proposed several recommendations to educate consumers on budgeting and financial planning, smart or comparative shopping, energy and resource conservation strategies.
“Also on debt management. We want to advise customers to avoid high-interest loans, like the loan sharks, and to pay down existing debt to reduce their financial strain. So, it’s a behaviour that most must adopt. It’s not just the government to give us subsidies and tax breaks but it’s for consumers to be educated enough to understand how to manage their spending and their debt.”
Regarding recommendations to the government and policymakers to address the impact of inflation, Dr. Lewis stated that the association has suggested measures such as targeted subsidies and support programs, tax relief initiatives, and the continued promotion and consumption of local products. The Government of Saint Lucia is currently implementing some of these recommendations.