The Di­rec­tor of the West­ern Hemi­sphere De­part­ment (WHD) of the In­ter­na­tion­al Mon­e­tary Fund (IMF), Ro­dri­go Valdes, says coun­tries in the Caribbean lose 2.5 per cent of gross do­mes­tic prod­uct (GDP) in cap­i­tal an­nu­al­ly on av­er­age.

“It does not hap­pen every year, but every 10 years you can have a 25 per cent loss. So, you have to be pre­pared for that,” said Valdes as he re­spond­ed to sug­ges­tions that while there have been some glow­ing words about how Caribbean coun­tries have han­dled their poli­cies over the past cou­ple of years, sev­er­al of these coun­tries are vul­ner­a­ble, par­tic­u­lar­ly as a re­sult of cli­mate change.

Asked what poli­cies or what re­forms can be ap­plied to pro­vide a buffer with re­gard to cli­mate ac­tiv­i­ty that has been af­fect­ing the Caribbean, Valdes said the re­al­i­ty is that the IMF has have been work­ing for years with oth­er part­ners in terms of re­gion­al arrange­ments.

“We have de­vel­op­ment banks in the re­gion, the IADB (In­ter Amer­i­can De­vel­op­ment Bank), we have CAF (Char­i­ties Aid Foun­da­tion), we have FLAR (Latin Amer­i­can Re­serve Fund) as an­oth­er arrange­ment that lends mon­ey to cen­tral banks.

“So per­haps the is­sue here is not whether we have these new in­sti­tu­tions, but how to co­or­di­nate well. We are con­vinced that the more co­or­di­na­tion, the less frag­men­ta­tion, that every­body works to­geth­er is bet­ter. No­body needs the mo­nop­oly of this, but we need to work to­geth­er.”

He said in terms of the Caribbean, it is very im­por­tant to face re­al­i­ty for the Caribbean and they they are do­ing it.

“There’s a strik­ing num­ber. Coun­tries in the Caribbean lose 2.5 per cent of GDP in cap­i­tal per year, on av­er­age. It does not hap­pen every year, but every 10 years you can have a 25 per cent loss.

“This is a mul­ti­lay­er sys­tem. You have to be care­ful with in­vest­ment. In­vest­ment has to be more re­silient. You have to work in the in­sur­ance side, in con­tin­gency bonds, for ex­am­ple. So, there is a lot to do. Some coun­tries have been very good on that. Let me take the case of Ja­maica and the last hur­ri­cane. They had some pos­si­bil­i­ties to use con­tin­gen­cies for that case,’ Valdes added.

WHD deputy di­rec­tor, Ana Cor­ba­cho, said cer­tain­ly, the Caribbean re­gion is very vul­ner­a­ble to cli­mate change shocks.

“And we are con­cerned that the pat­terns of these shocks may be chang­ing, be­com­ing more se­vere and more fre­quent, which cer­tain­ly re­quires more ac­tion on the gov­ern­ment side and the mul­ti­lat­er­al com­mu­ni­ty to sup­port Caribbean economies.

“In par­tic­u­lar on pol­i­cy mea­sures, what we have em­pha­sized in our di­a­logue is the need to in­te­grate bet­ter mit­i­ga­tion and adap­ta­tion strate­gies in pub­lic in­vest­ment plans,” her said.

The IMF of­fi­cial said that fos­ter­ing more ac­tive par­tic­i­pa­tion of pri­vate fi­nance in in­creas­ing in­vest­ment for cli­mate re­silience, as well as re­duc­ing the con­sump­tion of fu­els through elec­tri­fi­ca­tion.

“An up­side for the Caribbean is the green en­er­gy tran­si­tion. It could cer­tain­ly give coun­tries a chance to en­hance re­silience by in­vest­ing in re­new­able en­er­gies, and through that, boost­ing com­pet­i­tive­ness and low­er ex­po­sure to cli­mate change shocks<’ she said.

Last week, the IMF said while still grow­ing gen­er­al­ly faster than the rest of the re­gion, Caribbean economies are ex­pect­ed to slow in 2024 and 2025, on the back of de­cel­er­a­tion in tourism.

But it aso not­ed that growth in the Caribbean, ex­clud­ing Guyana, is slow­ing as the post-pan­dem­ic tourism re­bound is fad­ing af­ter reach­ing pre-pan­dem­ic lev­els.

“By con­trast, growth in the CAP­DR (Cen­tral Amer­i­ca, Pana­ma, and the Do­mini­can Re­pub­lic) re­gion is ex­pect­ed to re­main rel­a­tive­ly ro­bust, re­flect­ing strong pri­vate con­sump­tion buoyed by sus­tained re­mit­tances in­flows,” the Wash­ing­ton-based fi­nan­cial in­sti­tu­tion said in its “Re­gion­al Eco­nom­ic Out­look for the West­ern Hemi­sphere” re­leased here.

Un­der the theme “Re­bal­anc­ing Poli­cies and Press­ing on with Re­forms,” the IMF said in­fla­tion in Latin Amer­i­ca and the Caribbean (LAC) is pro­ject­ed to grad­u­al­ly de­cline from 4.7 per cent at the end of 2023 to 4.3 and 3.3 per cent by the end of 2024 and 2025, re­spec­tive­ly.

“While in­fla­tion is al­ready with­in the tar­get range in most LAC economies, it will take time for it to reach the tar­get—in most cas­es, un­til 2026—part­ly be­cause of the lagged ef­fect of tight poli­cies, the grad­ual process of glob­al dis­in­fla­tion, and the de­layed nor­mal­iza­tion of ad­min­is­tered prices in some coun­tries.

Re­gard­ing down­side risks to growth, the IMF said up­side risks to in­fla­tion risks to near-term growth are gen­er­al­ly tilt­ed to the down­side, es­pe­cial­ly in the Caribbean where down­side risks large­ly dom­i­nate be­cause of the pos­si­bil­i­ty of cli­mate-re­lat­ed shocks and weak­er tourism de­mand.

“Through­out the re­gion, ex­ter­nal down­side risks to growth re­late main­ly to tighter-than-ex­pect­ed US mon­e­tary pol­i­cy and greater com­mod­i­ty price volatil­i­ty. Pol­i­cy un­cer­tain­ty and so­cial ten­sions are key do­mes­tic down­side risks as these could hin­der the im­ple­men­ta­tion of eco­nom­ic poli­cies and re­forms.

WASH­ING­TON, Oct 27, CMC