Business
Modest growth expected in 2012 for CARICOM – CDB
Member countries of the Caribbean Community (CARICOM), recorded mixed economic growth last year as they continued to grapple with the fallout from the global economic and financial crisis.
But the Barbados-based Caribbean Development Bank (CDB) is projecting economic growth of between one and 1.5 percent in 2012.
The CDB in its annual review of the regional countries said that the growth ranged from a downturn in countries like Trinidad & Tobago, Antigua & Barbuda and St. Vincent & the Grenadines to marginal growth in CARICOM countries like Barbados, St. Lucia and the British Virgin Islands.
But the CDB, which is the region’s premier development banking institution, said The Bahamas, Belize Dominica, Jamaica and Grenada all recorded “stronger than marginal growth” while only Haiti and Guyana had economic growth in excess of five percent in 2011.
The CDB, which is holding its annual board of governors meeting, said that emerging and developing economies have been the key drivers of the global economic recovery, as advanced economies, the region’s main trading partners, have continued to struggle with “lingering weakness in financial, labor and housing markets”.
It said the recovery in the bank’s borrowing member states in the region “has therefore lagged behind” and that preliminary estimates indicate that 12 of the 18 countries registered expansion in real output during the year.
Among the 12, growth was marginal in Barbados, the British Virgin Islands, the Cayman Islands and St. Lucia, but stronger in The Bahamas, Belize, Dominica, Grenada, Jamaica and Montserrat; while Guyana and Haiti both achieved growth rates above 5 percent.
Of the countries recording contractions in their economies, -Anguilla, Antigua & Barbuda, St. Kitts & Nevis, St. Vincent & the Grenadines and Trinidad & Tobago -, the downturn in Trinidad & Tobago deepened, but the declines in the other four were moderate relative to previous years.
The CDB said that the fledgling recovery was mainly underpinned by moderate increases in tourism or, in the case of less tourism dependent, more commodity-based member countries, improvements in agriculture and mining, as well as related manufacturing activities.
It said that for some borrowing member states, construction and quarrying also contributed positively to growth.
“The general recovery in economic output and implementation of policy reforms mostly resulted in improved fiscal performances. This notwithstanding, many borrowing member countries (BMCs) confronted stubbornly high debt ratios that, together with sustained high unemployment rates and weak indicators of financial sector activity and stability, showed the lingering impact of the recession.”
The CDB said there were also pre-existing structural vulnerabilities, including susceptibility to natural disasters and concentration on a narrow range of goods and services such as tourism and commodity exports as well as BMCs’ failure to implement critical policy reforms in the past.
“Furthermore, adverse global developments during the year, including the persistent macroeconomic weakness in advanced economies and resurgent international commodity prices, weighed heavily on balance of payments,” it added.
The regional development bank said that international developments will continue to shape regional outurns in 2012, with prospects for the region closely mirroring the global outlook.
“The recovery in regional tourism is therefore expected to remain slow, in line with expectations for global demand, while no material pick-up in foreign direct investment is anticipated, reducing the likelihood of a boost to the balance of payments and, indirectly, to construction and other real sector activity.
“Consequently, most borrowing member countries are projected to grow modestly, by 1-2.5 percent in 2012. While dampening growth prospects in commodity-based borrowing member countries, the projected moderation in global commodity prices should have a positive impact on the balance of payments by reducing import values, which should in turn help to ease domestic … pressures within the borrowing member countries.
But the CDB said that the context framing regional prospects over the short to medium term remains one of limited fiscal space, structural weaknesses in the financial sector and an uncertain global outlook, with additional downside risks related to the region’s vulnerability to natural hazards and climate change impacts.
“Going forward, this context will continue to drive BMCs’ policy imperatives of reinvigorating growth and building resilience to exogenous shocks,” the bank said. (CMC)