IMF: Caribbean economic recovery beginning
WASHINGTON, United States, Thursday May 5, 2011 – The Caribbean is beginning to turn the corner after a long and deep recession, according to the International Monetary Fund’s (IMF) 2011 Regional Economic Outlook for the Western Hemisphere.
The IMF said that weak external demand and high public debt levels have held back economic activity in much of the region for the last two years. But the Caribbean economy, excluding the Dominican Republic and Haiti, is projected to expand by an average of about two percent this year, following a contraction of about ½ percent last year.
The report pointed out that tourism is recovering gradually, with the Bahamas, Barbados, Dominican Republic, and Jamaica observing a faster and earlier pickup in tourist arrivals than the smaller islands of the Eastern Caribbean.
“However, rising commodity import prices present a clear downside risk for most countries (with the exception of Trinidad and Tobago, which stands to benefit from higher oil export prices),” the report said.
The rising prices include food and energy prices and the IMF said that given the high debt burden in most Caribbean countries, fiscal consolidation should proceed.
“In this, efforts will be needed to reallocate spending to protect the poor from the impact of higher food and energy prices,” the IMF said. “Special efforts will be required to contain expenditure growth and in particular wages to strengthen overall competitiveness…Price subsidies should be avoided, particularly in the case of energy, as they tend to be costly and limit substitution.”
The report said that in countries where a well-functioning social safety net is not in place, temporary subsidies on staples consumed by the poor could be considered.
Meantime, the IMF noted that the financial system remains vulnerable to shocks from cross-border financial conglomerates and urged regulators to resolve the CLICO/British American Insurance mess.
Additionally, it said that improved export performance is crucial to boosting and sustaining growth in the Caribbean over the medium term. It said efforts to further develop and diversify Caribbean exports are needed, including by refreshing the tourism product by diversifying markets and developing new high value-added export services to take advantage of the new and emerging growth poles, including offshore financial centres.
Click here to receive free news bulletins via email from Caribbean360. ( )