CDB projects 1.7% regional economic growth this year
The Barbados-based Caribbean Development Bank (CDB) is projecting an average 1.7 per cent growth in its borrowing member countries (BMC) this year, following last year's performance of a minus 0.9 per cent.
The 2016 figure is in direct contrast to the 0.4 per cent growth experienced in 2015.
Addressing the bank's annual news conference on Friday, Director of Economics Dr Justin Ram said that the service-oriented economies recorded positive growth in 2016, while the predominant commodity exporters, except Guyana, contracted.
"Belize recorded a modest decline, while significant contractions were recorded in Trinidad and Tobago where that economy declined by five per cent, and Suriname which declined by a further nine per cent," Ram said.
INCREASE IN TOURISM
In his forecast, he noted that growth this year will largely be driven by increased tourism activities, as well as construction mainly related to the tourism industry.
He said, however, that although the growth projection is better than 2016, it is still below where it needs to be to stimulate employment and reduce the persistently high debt levels.
Ram noted that foreign currency reserves fell below the benchmark levels in some BMCs in 2016.
"Last year, Barbados' foreign currency reserves fell below the equivalent value of the global benchmark of three months of imports. The Bahamas and Suriname saw improvements, but reserves also remained below the three month threshold. Foreign exchange reserves remained above the threshold in other countries. Trinidad and Tobago continued to accumulate the largest stock of foreign reserves," he told the news conference.
CDB President, Dr Warren Smith, called for a reversal of the pattern of decline in the region's economies, saying the BMCs needed to be placed firmly on a path of sustained and inclusive income growth with discernible improvements in living standards.
Smith pointed to what he said were "the two most pressing policy imperatives" for the region: offering services that promote efficiency and cross-competitiveness while fostering inclusive growth and protecting vulnerable groups in society, and government activities financed by revenue systems that meet the sufficiency criterion while promoting equity and economic efficiency.
"Regional fiscal performance is, however, caught in a vicious cycle. Because economic growth rates are so low, many Governments are unable to generate the primary balances needed to correct adverse debt dynamics, so public debt remains unsustainably high.
"Emergency revenue measures implemented to stem fiscal deterioration following the global recession have had a perverse impact on competitiveness, further constraining growth," he added.
The CDB President said that unlike more diversified small states such as Mauritius and Singapore which have weathered recent global shocks well, Caribbean economies continue to exhibit the volatility that has kept average growth rates low; unemployment and poverty high; and living standards stagnant.
REGION NEEDS AN ACTION PLAN
Ram, meanwhile, believes the Caribbean needs an action plan which better enables it to participate in global supply chains and targeted social development assistance.
"But policymakers must be prepared to set the right environment to tackle the obstacles to growth. That is to say the doing business environment including access to financing for micro, small and medium-sized enterprises, and labour market reforms, all of which could increase productivity and enhance competitiveness.
"In this endeavour it would be necessary to reform governance structures and institutions to support the new paradigm. Governments will have to be willing to stabilise their economies through fiscal and debt consolidation, and to develop strong, targeted social development programmes," he said.