BASSETERRE, St. Kitts – WIDESPREAD recession has taken its toll on many countries, and, according to the World Bank, sharply slower growth in developing nations is likely to be realized in 2009.
According to the World Bank’s report “Global Economic Prospects (GEP) 2009”, early projections showing a 4.4% growth in Gross Domestic Product (GDP) for Latin America and the Caribbean (LAC) have proven to be well off the mark for 2009.
The report states it is now likely that LAC will witness GDP growth significantly decline this year, with some developing economies falling from a 5.8% growth in 2008 to a mere 2.1% growth in 2009.
The report noted that Europe and Central Asia have been “most adversely affected” by the global downturn, with an expected 2% contraction of GDP in 2009, compared to a 4.2% growth in 2008.
However, LAC was noted as the second hardest hit region from the recession, largely due to economic woes in markets the region depends upon for GDP growth.
“Latin America and the Caribbean is the second developing region where GDP is likely to contract in 2009, a fall of 0.6 percent following gains of 4.3 percent in 2008. Though growth outturns are likely to be diverse, a confluence of factors points to an overall downturn for regional GDP. Several countries have strong ties with the U.S. financial system and many companies felt immediately the impact of the credit crunch.
“Terms of trade for commodity exporters will plummet,” the report stated, “pressuring budgets for a number of countries. Some of these countries had failed to build up sufficient buffers during the commodities boom, but had instead used the high commodity prices to overheat their economies.”
Although global GDP is expected to contract by 1.7% this year and the World Bank report paints a dismal picture for the region, officials in the Federation have remained confident that St. Kitts-Nevis can weather the storm.
According to the 2009 Federal Budget Address, a growth rate of 3.0 % has been projected for St. Kitts-Nevis, and only a moderate rate of inflation around 2.5 percent was predicted for the nation.
Despite the overall optimism of the budget, Minister of Finance Hon. Dr. Timothy Harris did mention that an overall reduction in the Balance of Payments surplus could be predicted for 2009 due to significant impacts upon tourism receipts, manufacturing exports, foreign direct investment and remittances from abroad.
The World Bank further reported that the outlook for 2010 in comparison to 2009 remains “extremely uncertain”. Continued banking problems and other related tension in financial markets may lead to the “stagnation in global GDP or even to another year of decline in 2010”.
According to the GEP, unemployment and fiscal deficits are expected to increase further into 2010 in both high-income and developing countries, while unfavourable inflation could persist well into the year.
