Prospects For The Region Are Inextricably Linked To The International Outlook.

Global growth is set to accelerate from 3% in 2013 to 3.6% in 2014, according to the IMF’s April 2014 World Economic Outlook. The acceleration is expected to be accompanied by a rebalancing of the uneven performance of previous years. A firming of advanced economies is anticipated, with faster growth in the US and a return to growth in the Euro Area, which had slipped back into recession in 2012.

Continued strong growth is expected for emerging and developing economies, despite projected slower growth in China. In addition, further declines in commodity prices are anticipated.

Prospects for the region are inextricably linked to the international outlook. The region is therefore expected to grow by around 2.3% on average in 2014. Led by Guyana, Haiti and Suriname, growth is expected for all 19 BMCs, with most again set to grow by 1% – 3%. The recovery in regional tourism is expected to strengthen with the anticipated faster growth in the US and a return to growth in the Euro Area as well as expectations of improved airlift and reduced fuel costs resulting from further declines in commodity prices.

Prospects for the region are inextricably linked to the international outlook. The region is therefore expected to grow by around 2.3% on average in 2014.

This recovery, together with global FDI growth projected at around 10% in 2014 should have further spin-off benefits for construction and other real sector activity. The recovery and reconstruction efforts required in the wake of the Christmas Eve 2013 trough system that produced severe flooding in St. Lucia, St. Vincent and the Grenadines and, to a lesser extent, Dominica, should also lead to increased construction activity in these countries but put added pressure on the fiscal accounts to cover these unplanned expenditures.

While continuing to dampen growth prospects for the region’s commodity exporters, the projected moderation in global commodity prices should also ease domestic inflationary pressures. However, unemployment is expected to remain high in many BMCs, reflecting labour market rigidities and, in some cases, fiscal consolidation leading to cutbacks in public sector spending. Towards year end, Barbados announced plans for public sector lay-offs and/ or hiring freezes as part of its adjustment efforts. Grenada also announced plans to restructure its debt within the framework of an IMF-sponsored home-grown adjustment programme. BM

Dr. Wm. Warren Smith President Caribbean Development Bank
(Source CDB Annual Report 2013 – Volume One Our Caribbean Economies And Global Context)