Caribbean economic recovery lagging

Economic recovery in the Caribbean from the global financial crisis is lagging, says Central Bank Governor Ewart Williams. This most recent slide, he observed, was part of a longer-term trend that was constant because countries in the region have not been keeping pace with growth rates in the emerging markets around the world. Williams voiced his concern while delivering the feature address at the 4th Biennial International Business, Banking and Finance Conference, at the Office of the Campus Principal at the University of the West Indies, St Augustine, on Wednesday themed Restoring Competitiveness and Growth In the Caribbean.

Quoting an International Monetary Fund (IMF) report published less than a week ago, Williams said: “In its mid-year World Economic Outlook assessment, the IMF warned that the global economy had run into a speed bump arising from greater than anticipated weakness in US economy and renewed financial volatility arising from concerns about the depth of fiscal challenges in the euro area periphery –particularly, the Greek debt problem.” He added: “The IMF report noted that although emerging market economies in Asia and Latin America continue to experience robust growth, they are now facing the risk of over-heating with inflation increasing at a faster rate than could be explained by rising commodity and food prices.”

While there were efforts to reverse this trend and address the challenge of long-term viability, he said, the region had to face the reality that it had lost some comparative advantage at a time when the global economy had become less friendly. This difficult reality, he explained, was compounded by region’s inability to compete with low-cost producers of bananas and sugar with while aid-flow to the region, Haiti being the exception, have all been dried up. In addition, Caribbean tourism faced stiffer competition from Asian destinations and would experience even greater competitive pressure when Cuba’s market is fully opened up in the not too distant future. The continued high unemployment in the United States and the United Kingdom for the next two or three years which would have implications for workers’ remittances which are very important to some Caribbean economies, he said.

The fact that most Caribbean countries in the region already have unsustainably high debt burdens, which limits the extent to which Government spending could lead the recovery did not escape Williams’ attention. “One challenge faced by the entire region is the need to reverse the decline in the productivity and competitiveness which has occurred in recent years. The most egregious example of our competitive disadvantage is the banana industry, where the yields of our major producers–Saint Lucia, Jamaica or Dominica–range between 20 to 25 per cent of the most efficient Latin American producers. The 2011 Doing Business Report published by the World Bank and IFC ranks 183 countries in terms of their business facilitation environment. Among all countries, Jamaica and T&T, the two largest Caricom members, were ranked 81st and 97th respectively. Suriname was ranked 161st,” he said.

Eleven of 13 countries had a ranking greater than 105 for the sub-category “registering a business”, while just five Caricom countries tied for the lowest world ranking in the sub-category “closing a business.” He observed that the Global Competitive Index for 2010-2011 ranked Barbados 43. Meanwhile, the rest of the Caribbean jockeyed for positions between 84 –held by T&T –and 110 among 139 countries. Williams said: “We absolutely need to move beyond pious statements and seriously pursue what C Y Thomas calls a model of ‘open regionalism’ based on an outward-looking market-oriented framework in which the private sector is expected to take the lead. In addition to the liberalisation of trade in goods and services, this model involves the free trade movement of labour and capital, a regional strategic plan, the adoption of a harmonized investment code and the development of a regional capital market.”

Source: First Global Financial Services