Thu | Mar 22, 2018

World Bank expects favourable 2016 for Caribbean

Published:Friday | January 8, 2016 | 12:00 AM

The World Bank sees favourable prospects for the Caribbean economies.

It expects three per cent average growth over the three years to 2018, in light of some positive spillovers with the continued United States expansion.

Robust employment growth, accommodative financing conditions, and low oil prices in the largest economy in the world has supported domestic demand there. These conditions are expected to continue in the medium term.

Consequently, "remittance flows to the Caribbean have been robust and stable", according to the multilateral's Global Economic Prospects published earlier this week.

Caribbean economies have also been bolstered by rising tourism.

"For example, tourist arrivals to the Dominican Republic between January and September 2015 rose 8.4 per cent relative to the same period in 2014," said the report. "Visitors from the United States [jumped] nearly 10 per cent over the same period."

Jamaica saw its stopover arrivals from the US climb 3.8 per cent, while the total number of visitors staying over rose 2.4 per cent from year-earlier levels during the first nine months of 2015.

The World Bank estimates that output in the Caribbean expanded by 3.3 per cent in 2015, as investment picked up in the Dominican Republic and stronger business and consumer confidence lifted growth in Jamaica.

The Dominican Republic, the largest economy in the subregion, experienced a contraction in mining exports as prices fell.

"[However], a surge in investment, including the construction of new public schools and two new coal-fired power plants, provided some support to output," said the report. "In contrast, Jamaica saw growth pick up, amid increased business and consumer confidence, a successful IMF Extended Fund Facility programme review, and stronger mining output."

Ongoing normalisation of ties between Cuba and the United States is expected to boost travel to Cuba in the years ahead.

Growth in the US is projected to average 2.7 per cent in 2016, above potential but somewhat lower than predicted in June, reflecting a larger drag from net exports.

US growth is expected to stabilise around 2.3 per cent in 2017-18, with the output gap closing in 2017.

As a result, the World Bank lowered its growth forecast from its June projections for Caribbean economies, excepting Dominica, Guyana and St Lucia.

Dominica's economy is expected to register 2.5 percentage points higher growth in 2016 due to a 4.3 percentage point sharper-than-expected contraction last year, while Guyana's growth forecast remains the same at 3.8 per cent this year.

St Lucia is expected to see its economy outpace previous projections as the country realised 1.7 per cent growth in 2015 rather than the 0.6 per cent decline that was expected by the World Bank in June.

Jamaica's growth for 2016 is projected at 2.1 per cent - 0.1 percentage points lower than the June forecast - while the Dominican Republic is projected to grow at 4.6 per cent this year, down from the 4.8 per cent growth the World bank has forecast in June.

Still, the Caribbean is facing possible extreme weather which could set back growth.

"Forecasts suggest the El NiÒo weather pattern will be the strongest on record, hurting agriculture and potentially damaging infrastructure," said the World Bank report.