(Summary of the launch of the Economic Survey of the Caribbean on Tuesday, 26 July 2016)
Speaker: Dr Dillon Alleyne, Deputy Director, ECLAC Subregional Headquarters for the Caribbean in Port of Spain
FOLLOWING the launch of the Economic Survey of Latin America and the Caribbean by the Executive Secretary of ECLAC, details on the performance of the Caribbean economies in 2015, and projections for 2016 were provided by the ECLAC sub-regional office in Port-of-Spain.
Over the last few years, GDP growth has been volatile. In 2015, regional growth stood at 0.9%, marking a decline from 2014. There was heterogeneity in growth among the service producing economies, which posted average positive growth of 1.2% in 2015, with a projection of 2.5% for 2016. Among the goods producing economies, growth was flat (0%) in 2015, and is projected to fall further to -0.3% in 2016. Overall, it is anticipated that growth in the Caribbean will increase to 1.8% in 2016.
GDP growth typically leads to a reduction in unemployment. However, among countries with available data, the average regional unemployment rate remains very high at 15.2% in 2015. Improvements in growth among service producers have not resulted in substantial employment increases, especially among youth and women. The goods producers may possibly experience an increase in unemployment in the face of declining commodity prices.
The single most critical challenge to Caribbean sustainable development is the current debt crisis. High debt and large fiscal balances continue to persist despite consolidation, with an average debt to GDP of 70% in 2015. While Jamaica and Barbados are outliers, service producers have been especially challenged with debt to GDP ratio of 77.4% in 2015. In particular, Suriname, Trinidad and Tobago and Guyana will begin to see larger deficits if fiscal adjustments are not taken quickly. Moreover, Trinidad and Tobago has some fiscal buffers that must be used for productive investment.
External debt service payments have increased for both goods and service producers since 2013. At the same time, domestic debt service has also risen. This is particularly worrisome given that high debt service limits government’s capacity to invest. Furthermore, countries with floating exchange rates are exposed to exchange rate risks due to devaluation. In other cases, persistent borrowing may have made the exchange rates uncompetitive.
Prices have been falling with deflation of 0.5% across the service producers in 2015, which can have a dampening effect on investment. Very importantly, low prices impact positively on the poor and vulnerable through their incomes, as low prices maintain the value of expenditure and transfers.
Among other issues raised, was the fact that foreign direct investment has not been robust, falling to 7.1% of GDP in 2015 from 8.7% of GDP in 2014. Additionally, while the service producers have reduced their current account deficit, the deficit for the goods producers has increased.
Issues such as correspondent banking and the Brexit fallout are crucial going forward. In addition, the region should seek to adopt a coordinated approach aimed at advocacy to address financial rule making and lack of small states participation.
Further,structural change targeting the development of the relevant financial architecture and addressing de-risking is needed across the region.
Following the Brexit, a number of challenges may arise. A weak pound would impact on the ability of British citizens to take holidays in the Caribbean and to invest in vacation properties in the region. It can also potentially affect the value of remittances to the Caribbean.The Brexit could also spark new impulses for questioning regional integration in the Caribbean. Issues surrounding the European Partnership Agreement and a new trade deal with Britain must also be contemplated.
In addition to calls for debt reduction to address the limited fiscal space facing many Caribbean economies, ECLAC has also urgedcountries to pursue industrial restructuring to develop new export activities and to promote diversification.
*************************
DISCLAIMER
This article was posted in its entirety as received by SKNVibes.com. This media house does not correct any spelling or grammatical error within press releases and commentaries. The views expressed therein are not necessarily those of SKNVibes.com, its sponsors or advertisers
Trinidad & Tobago News 