A new report by the Inter-American Development Bank (IDB) says that Caribbean economies are at a crossroads, highlighting progress in economic recovery in most Caribbean economies, despite persistent external shocks, but warns that risks remain in the near-term.
The report, Global and Regional Economies at a Crossroads, notes that the region’s tourism-oriented economies have recovered more rapidly than expected from the sharp pandemic-induced contraction of 2020.
The report says commodity prices have declined, though they remain above pre-pandemic levels, with “persistent negative effects on households across the region, while, at the same time, buoying macro-economic prospects for commodity exporters”.
“The global economy is characterised by softening growth combined with lingering above-average inflation,” the report states, as noted in the spring edition of the IMF’s World Economic Outlook.
The IMF’s Regional Economic Outlook for the Western Hemisphere, titled Slower Growth, Stubborn Inflation.
The IDB’s Macro Report earlier this year called for “preparing the macroeconomic terrain for renewed growth,” as Latin America and the Caribbean face the triple threat of social, fiscal and growth challenges.
“The Caribbean is at a crossroads in addressing these challenges as well,” the IDB said.
It said key findings of the report state that, after the economic recovery of 2021 and 2022, key forecasters expect a global economic slowdown in 2023, driven mostly by expected lower growth in advanced economies.
That said, “those advanced economies remain the key drivers of demand for Caribbean tourism exports, as well as commodity prices,” said the report.
It says regional economies have grown faster than the global economy, recovering from a deeper shock, but “growth rates are likely to converge to pre-pandemic levels unless there are significant structural changes to enhance productivity, as noted in other editions of this periodical.”
In the near-term, the report says key macroeconomic risks and economic growth opportunities “remain relevant.”
It says risks include “external shocks from commodity prices, a potential synchronised downturn in advanced economies and external financing conditions.”
The report says emerging opportunities include “near-shoring (especially for global services), a renewed impetus for regional integration (especially for agriculture), and strengthening of existing lead sectors, with a focus on environmental sustainability and green energy.”
“Government and private sector responses to take advantage of emerging opportunities can steer economies onto the high path in the current crossroads, with superior economic growth than what was experienced pre-pandemic,” the report says.
It says country circumstances “vary substantially”, as noted in the country sections of this report.
The report says some countries’ (The Bahamas and Jamaica) tourism sectors have recovered more rapidly than others (Barbados), and that “there is the hydrocarbon-fueled extraordinary growth of Guyana that dwarfs the economic growth of all countries in the Western Hemisphere.”
The report says key risks and opportunities also vary across countries.
“Government and private sector responses to take advantage of emerging opportunities can steer economies onto the high path in the current crossroads, with superior economic growth than what was experienced pre-pandemic,” said David Rosenblatt, the regional economic advisor for the IDB’s Caribbean Department.
“Continued efforts to mitigate risks through macroeconomic policy strengthening continue to be a key enabler for future investment and innovation,” it added.
“Global and Regional Economies at a Crossroads” is part of the IDB’s Caribbean Economics Quarterly series.
In addition to a regional overview section, it has country-specific sections for The Bahamas, Barbados, Guyana, Jamaica, Suriname, and T&T. (CMC)
