Should the Caribbean be upbeat about its 2017 economic prospects?
Economically, 2016 was another difficult year for Barbados and its neighbours.
With a new year approaching, the Caribbean’s economic stewards will be hoping that 2017’s performance will be better. Are these hopes realistic?
Based on the forecasts of several entities which monitor the economic performance of Caribbean countries, there are hopes of improvement but next year will not be easy.
A lot will also depend on the effects of the United Kingdom’s exit from the European Union, and the impact of the incoming Donald Trump administration in the United States.
In its most recent outlook for the Western Hemisphere, the International Monetary Fund said: “Economic activity in Latin America and the Caribbean is expected to bottom out in 2016, before making a modest recovery next year.
“While weak external demand and persistently low commodity prices continue to weigh on the regional outlook, domestic developments have been the key driver of growth outcomes in some stressed economies.
“GDP is expected to contract by 0.6 per cent in 2016 before recovering to 1.6 per cent growth in 2017. Recurrent growth disappointments point to lower potential growth, underscoring the need for structural reforms to boost productive capacity, but these will take time to bear fruit.”
The World Bank also had its say. It concluded that “the Latin American & Caribbean (LAC) region is at a turning point”.
“The windfall from the global commodities boom has faded while LAC governments face increased social expectations from an emerging middle class that is more connected, more involved, and demanding more.
“Gross Domestic Product in the region is expected to contract 1.1 per cent in 2016, following about a half percentage point decline in 2015. That marks the first back-to-back years of recession in over three decades.
“The region’s economy is forecast to grow by 1.8 per cent in 2017 and continue expanding in 2018, but that will largely depend on the strength of external markets and the capacity to address macroeconomic challenges.”
In her latest Caribbean Economic Report, RBC Caribbean group economist Marla Dukharan said 2016 was “the third consecutive year of progressively weaker global growth”.
“Brexit is not expected to pose significant risks, except for Barbados (in the form of lower UK tourists) and Jamaica (where remittances from the UK account for two per cent of GDP),” she said.
“Similarly, the extent to which Trump’s victory will affect the Caribbean, depends largely (for now) on the global macroeconomic and market channels – currencies, commodities, and ultimately, confidence.”
Focus Economics, an international organisation that produces economic analyses and forecasts, said economic growth in Central America and the Caribbean “is expected to accelerate next year and the region will expand at a faster pace than Latin America”.
“Our analysts expect GDP to grow 3.1 per cent in 2017. GDP growth forecasts were revised up for Haiti, Honduras and Trinidad and Tobago while estimates for the rest of the countries were left unchanged. Next year’s increase represents a marginal acceleration over the 2.9 per cent expansion expected for this year.
“Panama will be the fastest growing economy next year with an expected growth rate of 5.7 per cent. In contrast, the economies of Puerto Rico and Trinidad and Tobago, in that order, are expected to be the worst performers.”
