Recovery looking up
by Renuka Singh SUNNY DAYS may be on the horizon again as Caribbean economies have started to show some recovery from last year’s recession. A new survey of Latin American and Caribbean economies conducted by the Economic Commission for Latin America and the Caribbean (ECLAC) says while the impact of the global economic crisis varied from island to island, once the smoke cleared, Latin America, the Caribbean and emerging economies in Asia stood out among the most dynamic regions in the world. The ECLAC report released in Port-of-Spain last month found that both internal and external factors underpinned the positive performance.
The most notable external factors include the continued buoyancy of certain key Asian economies. This Asian-sustained demand for products from the region led to significant recovery in both prices and volumes of exports, especially in the metals, minerals and petroleum areas. “The albeit sluggish recovery of the United States economy, meanwhile, has improved the situation for Mexico and Central America and inasmuch as it boosted tourism demand, possibly for the Caribbean as well,” the report stated. It was observed that remittances sent by migrant Latin American and Caribbean workers from the United States picked up slightly.
There were some exceptions, however, to this brighter picture. A number of Caribbean countries, as net importers of food, fuel, metal and minerals, suffered rather than benefited from the upturn in commodity prices. This made some Caribbean islands highly vulnerable to fluctuations in the global economy. At the height of last year’s global financial crisis, gross domestic product (GDP) contracted throughout the Caribbean. Islands within the Eastern Caribbean Currency Union, which include Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St Kitts-Nevis, St Lucia and St Vincent and the Grenadines, contracted by an average of 7.3 per cent.
Countries that fall under the more developed countries banner, which include The Bahamas, Barbados, Belize, Guyana, Jamaica, Suriname, and Trinidad and Tobago, suffered less and contracted by an enviable 1.2 per cent. The cost of the crisis to the Caribbean was estimated at ten per cent of GDP, with the worst affected countries being Trinidad and Tobago, Antigua and Barbuda. The favourable situation that exists in the islands now is the result of transitory factors which, unfortunately, are unlikely to recur in 2011. The region was able to respond positively to external demand and counterproductive stimuli by taking advantage of the already existing idle capacity, but the possibility could be exhausted during the present recovery.
“At the same time, governments are facing a waning capacity to keep the current countercyclical measures in place and to introduce new stimuli without sacrificing the achievements of several years of effort in terms of maintaining macroeconomic equilibrium. “In light of these considerations, growth estimates for 2011 are 3.8 per cent for the region as a whole,” the report stated. Though the report said that the recovery was “well-established”, it warned that the previous challenges involved in the attaining steady growth will still bother the islands. The report noted that the question of creating the necessary conditions to foster public and private investment and productivity will continue to haunt the Caribbean.
“Simultaneously, the region must continue to boost public finances to expand and improve social programmes, particularly those with a redistributive impact, so as to be able to achieve growth with greater equity,” the report said. After the findings and the analysis, ECLAC devised a series of strategies to achieve a way forward – all of which fall under the investment umbrella. It advised the need for fiscal consolidation but not at the expense of raising employment, ensuring sustainable projects through public and private investment programmes, or promoting a healthy investment environment that puts local and foreign firms on equal footing.
“Increase technological sophistication of exports through intense investment in domestic capital and diversify export products and markets to reflect new and emerging players in international trade, such as expanding trade with Latin America,” the report said.Trinidad and Tobago and the wider Caribbean need to take advantage of the fact that while the world economy contracted by 0.6 per cent in 2009, it is expected to grow by 4.5 per cent in 2010, the report said.