Caribbean & Central America - May 2014 (ISSN 1741-4458)

In mid-April, the International Monetary Fund (IMF) published its latest overview of the Western Hemisphere economies and warned that “growth remains tepid” in most Caribbean countries and that reducing high public debt levels remains the “key challenge in much of the Caribbean”.

In the tourism-dependent economies, growth in 2013 averaged 0.75%, a slight improvement on the zero growth experienced in 2012, and their external positions remain “very weak” with current account deficits averaging 17% of GDP.

Another source of concern for the IMF is the future of Venezuela’s Petrocaribe initiative, which represents between 4% and 7% of GDP in countries such as Guyana, Haiti, Jamaica, and most of the Eastern Caribbean Currency Union (ECCU). A sudden interruption in the Petrocaribe arrangement, or an abrupt change in the conditions, “would create significant balance of payment problems” for the recipient countries. Alternative sources of financing would need to be found.

Public debt levels remain particularly high in the tourism-dependent economies, averaging 92.3% of GDP in 2013, and the governments of (in particular) Antigua (92.2%), Barbados (92.0%), Belize (75.5%), Grenada (115%), and St Lucia (79.8%) “face considerable financing challenges”. Jamaica remains the most indebted of the Caribbean economies, with public sector gross debt of 138.9% of GDP in 2013. The other point highlighted by the IMF is that “financial sector issues” in the ECCU are a source of concern because of the stresses on indigenous banks.

Boosting potential growth remains the biggest challenge, with a particular need to address structural weaknesses such as high energy and labour costs. Slow growth, of course, adds to the difficulties of maintaining fiscal consolidation.

Growth projections for the English-speaking Caribbean for 2014 and 2015 are, respectively: Antigua & Barbuda 1.6% and 1.9%; The Bahamas 2.3% and 2.8%; Barbados -1.2% and 0.9%; Belize 2.5% and 2.5%; Dominica 1.7% and 1.7%; Grenada 1.1% and 1.2%; Guyana 4.3% and 4.0%; Jamaica 1.3% and 1.7%; St Kitts & Nevis 2.7% and 3.0%; St Lucia 0.3% and 1.0%; St Vincent & the Grenadines 2.3% and 2.9%; Trinidad & Tobago 2.2% and 2.2%.