Economy
The St Helena economy is heavily aid-dependent, with the public sector accounting for two-thirds of income and a large share of employment. Its economic challenges include having few commercially exploitable natural resources, an isolated location with lack of air access and continued migration of the working age population to the UK, Falkland Islands and Ascension Island and a low birth rate. Remittances from offshore workers form a significant contribution to Gross National Product. Although St Helena has struggled in the past to be economically independent, there have been several periods when it has successfully exported goods and services including as a flax producer up to the mid 1960s, supplying mailbags under contract to the British Post Office. Since the demise of the flax industry, St Helena has had no significant export income.
Most goods are imported from South Africa and the United Kingdom.
The majority of the private sector businesses are engaged in trade or services and housing construction remains relatively vibrant, being largely financed by remittances from Saints living offshore.
Due to out-migration and a growth in the local private sector, labour market conditions on the Island have tightened, reducing the unemployment rate in November 2008 to 2.3% of the labour force. Inflation (which is closely tied to the South African economy) reached 11.4% in the fourth quarter of 2008, but this is expected to reduce during 2009 as inflationary pressures ease.
The economy continues to be dominated by the public sector, which employs around 60% of the labour force. GNP per capita was £4,800 in 2006-07, UK aid funding has risen significantly in recent years to £12.4 million in 2006-07. The population has declined by over 18% in the past decade, dropping from 5,008 in 1998 to 4,084 in 2008. This is becoming an increasingly urgent economic problem, as the workforce continues to shrink and an increasing proportion of elderly pensioners remain. This has implications for the affordability of future health and pension programmes as well as the availability of critical skills on the island.
Domestic tax revenue (totalling £3.3 million (in 2006-07)) was generated by both direct taxes and import duties. Government also receives revenue from the sale of services.
The private sector consists of just over 200 private businesses, most of which are small-scale and many are operated on a part-time basis. The main industries are Retail, Fishing, Construction, Agriculture and Tourism. They employ close to 900 workers and around 255 part time workers. The growth of the tourism industry is constrained by the limited and expensive access to the island. St Helena receives approximately one thousand tourists and seven thousand day visitors a year.
The economic prospects for St Helena are tied closely to investment in the development of sustainable new growth industries that will provide higher living standards and will reverse the long term downward population trend. The limited access to the island remains a critical barrier to the achievement of this objective. It is noteworthy that following the announcement in 2005 of the air access project, population decline stabilised and inward investment increased. Improved access remains an essential ingredient in the long term future of the island.