Soyi­ni Grey

soyi­ni.grey@guardian.co.tt

The les­son of the pan­dem­ic is that the Caribbean has to in­su­late it­self from glob­al shocks.

Speak­ing to jour­nal­ists tak­ing part in an In­ter­na­tion­al Mon­e­tary Fund work­shop in Bar­ba­dos, act­ing di­rec­tor of the West­ern Hemi­sphere de­part­ment Nigel Chalk said the Caribbean has to build buffers.

These, he said, in­clude man­ag­ing low debt, hav­ing a flex­i­ble ex­change rate and in­vest­ing in in­ter­na­tion­al re­serves.

Chalk said this makes it more pos­si­ble for tourism-based coun­tries like Ja­maica to weath­er eco­nom­ic short­falls in the Unit­ed King­dom which is pre­dict­ed to have the slow­est growth in Eu­rope and there­fore a pop­u­lace that may be less in­clined to trav­el to the Caribbean on hol­i­day.

On Mon­day the IMF pre­sent­ed a more op­ti­mistic view in its World Eco­nom­ic Up­date than its Oc­to­ber 2022 re­port, but it al­so cau­tioned more need­ed to be done to elim­i­nate con­cern.

Clos­er to home the re­vised fo­cus from the IMF glob­al re­port came with a spe­cif­ic chal­lenge for the Caribbean to cre­ate op­por­tu­ni­ties for eco­nom­ic growth.

In is­su­ing the re­vised glob­al out­look, The IMF’s Eco­nom­ic Coun­sel­lor and Di­rec­tor of its Re­search De­part­ment Pierre-Olivi­er Gour­in­chas said while the econ­o­my per­formed bet­ter than ex­pect­ed since their last up­date in Oc­to­ber, it was not enough to elim­i­nate con­cern.

“The glob­al econ­o­my is ex­pect­ed to slow this year be­fore re­bound­ing next year,” he said.

Speak­ing from Sin­ga­pore, the econ­o­mist, said that this up­date be­ing more pos­i­tive than the last may be in­dica­tive of an econ­o­my in re­cov­ery in­clud­ing a de­cline in in­fla­tion.

Speak­ing more specif­i­cal­ly on the out­look for the Caribbean, the IMF’s act­ing Di­rec­tor of the West­ern Hemi­sphere de­part­ment, Nigel Chalk said the mes­sage from the re­port is that the re­gion has to grow.

“We know that liv­ing stan­dards in the re­gion on­ly go up when you have growth, when you have pro­duc­tiv­i­ty,” Chalk said.

“The chal­lenge fac­ing the re­gion is, in­di­vid­u­al­ly the coun­tries are rel­a­tive­ly small, and there is less economies of scale,” he said.

He be­lieves di­ver­si­fi­ca­tion could ad­dress two of the biggest threats fac­ing the re­gion.

He said there is a need for the re­gion to in­su­late it­self from neg­a­tive glob­al ac­tiv­i­ty and pro­vide growth op­por­tu­ni­ties.

“You have to bal­ance the two things right,” he said. “You have to take ad­van­tage of your com­par­a­tive ad­van­tage and you have to have a suf­fi­cient­ly di­ver­si­fied econ­o­my so that you are re­silient to shocks.”

Specif­i­cal­ly, how­ev­er, in T&T with its en­er­gy-based econ­o­my the out­look is pos­i­tive, even though in­fla­tion re­mains high and Chalk ac­knowl­edged the ef­fects the Rus­sia/Ukraine war has had in in­creas­ing en­er­gy prices.

“T&T and Guyana are grow­ing very strong­ly and are ex­pect­ed to con­tin­ue grow­ing very strong­ly.” But “they are al­so suf­fer­ing from rel­a­tive­ly high in­fla­tion which will be some­thing they’ll have to man­age dur­ing the course of the year but in some sense, it is a lit­tle eas­i­er to man­age that when there is a lot of in­come com­ing in from nat­ur­al re­source rev­enues.”

As for what to do with that en­er­gy sec­tor rev­enue, he says the IMF has no stan­dard ad­vice when it comes to how these coun­tries should use sov­er­eign wealth funds such as T&T’s Her­itage and Sta­bil­i­sa­tion Fund. The view is they pro­vide an op­por­tu­ni­ty to put away ex­cess prof­its from high oil prices that could be with­drawn when prices fall. This he said helps with “fis­cal man­age­ment with eco­nom­ic man­age­ment.” Al­ter­na­tive­ly, it is a way for the coun­try to re­place “re­sources un­der­ground with es­sen­tial­ly fi­nan­cial re­sources held in the in­ter­na­tion­al fi­nan­cial sys­tem.”

Ul­ti­mate­ly it re­mains the coun­try’s choice, be­cause he said there may be a re­quire­ment lo­cal­ly to use the fund to ad­dress in­fra­struc­tur­al or so­cio-eco­nom­ic short­falls. How­ev­er, if there is an ex­cess of prof­its, then he said it would be pru­dent to put mon­ey away for fu­ture use.

All in the ser­vice of build­ing eco­nom­ic re­silience in the Caribbean, “the pan­dem­ic showed us that be­ing de­pen­dent on one in­dus­try par­tic­u­lar­ly tourism could leave you very ex­posed when you get hit by an ex­ter­nal shock.” he said.

He al­so be­lieves the road to di­ver­si­fi­ca­tion re­quires an en­abling en­vi­ron­ment for growth.

Chalk said “I think en­cour­ag­ing en­vi­ron­ment for in­ward in­vest­ment re­mov­ing ob­sta­cles like bu­reau­cra­cy, cre­at­ing a good in­fra­struc­ture in or­der to sup­port pri­vate sec­tor in­vest­ment, hav­ing a strong ed­u­ca­tion sys­tem in or­der to pro­vide the hu­man cap­i­tal nec­es­sary for those in­vestors to get work­ers,” is im­por­tant.

He said while many in the re­gion have sol­id ed­u­ca­tion sys­tems and find­ing so­lu­tions to the re­gion’s brain drain is al­so a con­cern.

Chalk said re­gion­al gov­ern­ments ought to in­vest in cre­at­ing an at­trac­tive en­vi­ron­ment so that peo­ple with spe­cial­ist train­ing and ad­vanced de­grees pre­fer to re­main in the re­gion rather than leave for a life over­seas. En­cour­ag­ing them to re­main in the re­gion could boost its growth po­ten­tial.