The world economy’s return to growth is positive for countries like Barbados.
However, the International Monetary Fund’s Western Hemisphere Department director Alejandro Werner is advising such places which need to lower fiscal deficits to pay attention to “the fine balance between preserving inclusive growth and stabilising high public debt, which has been rising”.
Yesterday, Werner gave an updated outlook for the region in which he predicted the Caribbean economy would grow by 3.9 this year and 4.2 per cent next year. The IMF’s most recent growth projection for Barbados is 0.5 per cent this year.
“Parts of the Caribbean are benefiting from stronger growth in the United States. Economic prospects for the Caribbean are generally improving. Modest growth is expected in the region in both 2018 and 2019, supported by higher US growth following the recent US tax reform,” Werner said.
“However, some of the islands that were hit hard during the 2017 hurricane season face a protracted recovery. In Dominica, GDP is projected to decline by 16 per cent in 2018, before rebounding in 2019 as reconstruction gathers pace.”
He cautioned, though, that “several risks could hurt the region’s recovery”.
This included the fact that “upcoming elections in many countries create economic and policy uncertainties in the next year”.
“Pressures for inward-looking policies in advanced economies – including through a retreat from cross-border integration – and factors such as global geopolitical tensions and extreme weather events could compound these uncertainties,” Werner said.
“In addition, financial market conditions could tighten if inflation increases more than expected in the United States, or if global financial vulnerabilities build up due to excessive risk taking during the long period of very low interest rates and low asset price volatility.”
He also said now was a good time for the region to “rebuild buffers and raise medium-term growth”.
In a positive note, he added: “Recent trends in the world economy and financial markets are good news for Latin America. Global growth and trade are on an upswing, and we expect the momentum to continue in 2018. Stronger commodity prices have also helped the region rebound.” (SC)