Caribbean & Central America - December 2017 (ISSN 1741-4458)

The latest forecasts from the Eastern Caribbean Central Bank (ECCB) show the effects of hurricanes Irma and Maria on growth prospects for 2017. Not surprisingly, there have been sharp downward revisions for Anguilla, Antigua & Barbuda, Dominica.

The ECCB forecasts cover Anguilla, Antigua & Barbuda, Dominica, Grenada, Montserrat, St Kitts & Nevis (SKN), St Lucia, and St Vincent & the Grenadines (SVG). The overall average growth rate for 2016 was 2.57%, with Antigua leading the pack on 5.36% and SVG bringing up the rear on 0.82%. The latest estimate for 2017 is for an overall average of 1.52%. The biggest faller is Dominica, which has seen growth collapse from 2.7% in 2016 to an estimated contraction of -6.22% in 2017. Anguilla is expected to contract by -3.54% (down from growth of 2.47% in 2016). Antigua will see a marked slowdown, to 3.11% from 5.36% in 2016, but not outright recession. SVG, however, is expected to dip into recession with a contraction this year of -0.70%. Two others to slow markedly in 2017 will be Montserrat, down to 0.59% growth from 1.34%, and SKN, down to 1.93% from 3.15%. Two countries, however, will buck the trend and show advances in 2017. Grenada is expected to post growth of 3.35%, up from 2.0% in 2016, and St Lucia is forecast to grow by 3.45%, up from 0.93%.

Looking forward to 2018, there will be sharp rebounds in the worst hurricane-hit territories because of reconstruction. Thus, Dominica is expected to expand by 10.63% next year and by 7.59% in 2019. Anguilla will bounce back with growth of 5.93% in 2018 and 4.48% in 2019. And Antigua will see growth of 5.85% in 2018 and 4.23% in 2019. The average for the overall group is forecast to be 4.20% in 2018. Even SVG, which experienced below 1% growth in 2015 and 2016 and a small contraction in 2017, is expected to move into more positive territory with growth of 1.89% in 2018 and 1.92% in 2019.

Not surprisingly, the devastating 2017 hurricane season has pushed the subject of debt relief back up the agenda. The United Nations (UN) Economic Commission for Latin America and the Caribbean (Eclac) has once again been pushing its debt-for-climate-adaptation swap initiative, first mooted in early 2016. Eclac inaugurated a debt-swap task force at a meeting in Trinidad in November. Eclac has been arguing that the high debt of many Caribbean countries was linked to the region’s vulnerability to extreme climatic events.

It is clear that the linking of the debt issue to the climate change debate could prove to be effective politics. The aim is to focus first on multilateral debt with what has been termed “an aggressive advocacy strategy”.

Following the 24 November meeting in Port of Spain, Eclac issued a statement saying: “It is an innovative strategy that involves harnessing concessionary flows to transform the debt of the region into a source of investment in resilience, while at the same time re-energising growth and promoting economic transformation in the economies of the sub-region, through investment in adaptation projects and green industries.”

At a tourism summit at the end of November in St Lucia, Prime Minister Allen Chastanet added his weight to the debate, saying that while investment in resilience is essential, not least because it is now being demanded by insurers, “we are going to fight with the IMF to say that we cannot borrow that money to build the resilience, that money cannot be on top of the debt we already have.”