Briefing | The state of the global economy
What is the current state of the economy?
Average economic growth in the Caribbean region is expected to be approximately two per cent in 2017, which is a great improvement on the negative growth recorded in 2016. As global geopolitical tension increases, governments change and the world transitions in a new technological era, Caribbean countries must figure themselves out of their high-debt low-growth trajectory. Most non-commodity Caribbean countries recorded positive economic growth in 2016 and are expected to record positive growth in 2017 as a result of infrastructural expansion and provision of tourism services.
This, coupled with sluggish gross domestic product (GDP) growth rate, low national savings rates reduces the amount of domestic investment that has been barely sufficient to expand infrastructure beyond annual depreciation, and has not been enough to inject new investments to assist these countries maintain stable macroeconomics. Countries that predominantly export commodities all witnessed a decline in GDP, except Guyana.
What is their debt position?
Notwithstanding the slow growth in output, according to the Caribbean Development Bank (CDB), five countries managed to reduce their public debt between 2015 and 2016: Antigua and Barbuda (by 5.5 per cent), Grenada (by 5.1 per cent), Jamaica (by 4.5 per cent), St Kitts and Nevis (by 3.5 per cent) and Guyana (by 2.2 per cent). All of the countries in the region have a public debt burden that is more than 60 per cent of GDP. Most countries recognise the importance of debt reduction to increasing their prospects for economic growth.
What about the doing business environment?
The Caribbean region ranking fell three places to 120 on the 2017 Global Doing Business index. According to the CDB, the ability to do business declined in most Caribbean countries in 2017. Guyana, along with Jamaica, appears to be the Caribbean's best performers. Guyana inched up 16 in the World Bank 2017 Global Doing Business ranking mainly as a result of implementing credit bureau reforms. Jamaica remained consistently best regional performer on its Doing Business indices, even though they witnessed a small decline in rankings. Jamaica is ranked the highest at 67.
What about unemployment and labour demand?
Unemployment remains high across the region. Unemployment in Jamaica is more than 12 per cent, Dominica and St Lucia greater than 20 per cent, Suriname 11.9 per cent, Guyana more than 16 per cent. According to the CDB, youth unemployment in their member countries is more than 30 per cent. This is indicative by the poor infrastructural development and low growth in GDP. Most of the jobs are mainly lower-level services or agriculture. These countries do not have the capacity to absorb all the labour they train because income levels are too low and they receive more attractive packages overseas.
What about reserves?
According to the CDB in their latest report, foreign currency reserves fell below the required benchmark amount in some Caribbean countries in 2016. In the meantime, Jamaica has recorded increased record high NIRs. In 2016, Barbados' NIR fell below the equivalent value of the global benchmark of three months of imports, and continues to be insufficient now in 2017. The Bahamas and Suriname experienced increases in the level of reserves. Reserves, however, 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 reserves.
How will the countries improve?
Though from the outside it might appear that Caribbean countries are all the same, when you visit each island you realise that each is unique in its own way. The natural topography, the differences in structure of the mountainous terrains, volcanic and lime-stone structures, different types of peaks and valleys, hot springs, rivers and adventurous trails give each country their uniqueness.
It is this upon which they try to capitalise with tourism, and they have, as tourism inflows have been increasing but countries find it difficult to retain the benefits as the bulk of the tourism dollar is repatriated.
Caribbean countries must take full advantage of these countries' specific heterogeneities that make them similar yet unique.
The onus is on each island to position itself to provide complementary services to each other instead of competing services which limits the level of intraregional trade.
- Dr Andre Haughton is a lecturer in the Department of Economics on the Mona Campus of the University of the West Indies. Follow him on Twitter @DrAndreHaughton; or email firstname.lastname@example.org