Recent data from the Inter-American Development Bank has shown that the small developing economies of the Caribbean, including Guyana, were the most adversely affected by the economic contraction experienced in 2015 and its immediate aftermath. Since then, economic growth in the Caribbean has remained very low, inconsistent and unsustainable.
The average economic growth rate in the region in the last two years was less than one percent. Nearly all the countries continue to be seriously constrained economically by their high debt-to-GDP ratio, low production, high crime and unemployment rates, rampant corruption and ineffective leadership.
Suriname and Trinidad and Tobago are still trying to cope with the fall in oil and commodity prices, with both countries still experiencing recessions. A drop in the number of tourists continues to affect Barbados, Jamaica, St Lucia and several other countries.
Guyana is an exception because of good fortune. Even though its sugar and bauxite industries are actually insolvent, its economy is buoyed by strong gold prices and the prospect of income and tax revenues from oil extraction that is scheduled for 2020. Hopefully, traditional ethnic divisions will not derail that venture or the development of the country’s enormous and varied endowment of natural resources. Apart from Guyana, the economic outlook for the region is cloudy at best, given its small size.
That being the case, the International Monetary Fund (IMF) has stated that the economic prospects for the Caribbean are generally improving. It has forecast a modest growth rate of two percent for the region’s economies in 2018 and 2019. The IMF’s positive outlook is supported by higher commodity prices, and by the economic growth in the United States following the recent US tax reform, as well as recent trends in the world economy and financial markets. Growth in the region is also driven by the end of recessions in Argentina, Brazil and Ecuador.
The IMF’s projection of a robust economic performance for the Caribbean for this year and next will depend on a number of factors, such as narrowing the wide divergences between countries, an expansion in international and regional trade, increase in investments, low oil prices compared to a few years ago, an increase in tourist arrivals in the region and a healthy flow of remittances.
However, there are issues that could affect the IMF’s prediction. They include the upcoming general elections in Barbados and a few other countries, which could create economic and policy uncertainties and thus subdue the region’s potential economic growth rate. The creation of inward-looking policies that could lead to a retreat from trade and regional integration, global geopolitical tensions and natural disasters which over the years have negatively impacted the region’s economies. It is known that the Caribbean is one of the regions in the world that is prone to natural disasters on a perennial basis.
The predicted higher levels of sustained economic growth for the Caribbean in the medium and long term will only happen if a number of factors are in place. The governments of the region must develop a policy framework to attract as well as retain local and foreign investment; establish meaningful public-private sector partnerships and end corruption and waste in the public sector, in order to gain the confidence of investors. They must improve trade among themselves; facilitate investment in the productive sectors of the economy; accelerate the process to expand, diversify and transform the economy from its dependence on primary products by expanding production of higher value-added goods and services. They should also harness their country’s natural resources, process their raw materials and develop manufacturing industries. Not to mention the increase in foreign currency earnings and exports that can be attained by an increase in production and a reduction in imports. But there must be the political will to achieve these goals.
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