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Caribbean Region Quarterly Bulletin -July 2014
High fiscal deficit continues to be the main challenge for The Bahamas and Barbados. Jamaica has been complying with the fiscal structural and quantitative targets set in the IMF support program and has completed its fourth review. Growth remains strong in Guyana and Suriname, but 2014 performance will depend on gold prices not falling significantly. In Trinidad and Tobago real growth could outperform last year’s value.
In The Bahamas, the government presented its 2014/15 budget, providing an update on its fiscal consolidation plan and the implementation framework of the Value Added Tax (VAT). In particular, the new budget considered a VAT rate of 7.5 percent, In the first nine months of 2013/14 the fiscal deficit narrowed by 32 percent after higher revenue collection and lower capital expenditure. Tourism performance remains strong and growth is expected to recover to 1.3 percent this year.
Barbados’ sovereign credit rating was downgraded to B3 by Moody’s, which argued that the country is facing continued challenges with high fiscal deficits, rising debt levels, falling international reserves, and increasing pressure on the country’s peg to the US dollar. The government has recently revised its fiscal target for 2014/15 and projects a deficit of 6.9 percent of GDP, significantly worse than the initial target of 2.8 percent of GDP.
In Guyana, growth projections of 5.6 percent could be revised downward if gold prices continue to decline. In contrast, the sugar industry is showing signs of revival. Guyana has not yet passed the Anti-Money Laundering/Combating the Financing of Terrorism Act and could be sanctioned internationally if it is not passed by October 2014. New air services that connect Guyana and the US are expected in the next several months.
Jamaica’s outlook continues to improve despite continuing challenges ahead. The economy has grown 0.9 percent in FY2013/14 and is expected to grow around 1.5 percent in the current fiscal year. The government returned to the international financial market and issued a 10-year US$800 million Eurobond on July 2nd at an interest rate of 7.625; these inflows will also boost net international reserves.
Suriname’s macroeconomic indicators remain strong with 2014 real GDP growth expected at 4 percent and inflation at 4.3 percent. The authorities expect the fiscal position to improve in the current year and have continued expanding economic links with other regions. Suriname has recently signed onto the REDD+ program for US$3.8 million to help reduce greenhouse gas emissions resulting from deforestation.
Trinidad and Tobago
In Trinidad and Tobago, 2014 real growth could reach 2.5 percent, outperforming last year’s value. Credit to the private sector showed signs of recovery, while business credit also expanded 3.5 percent in March after 14 month of decline. In contrast, the shortage of US dollars and the excess of liquidity in the banking system continue to present some challenges to the economy.
Eastern Caribbean Countries
Recent statistics show that real growth in the Eastern Caribbean Countries slightly resumed in 2013 and reached 0.7 percent, compared with 0.2 percent in 2012. However, the outlook is improving and growth could accelerate to 1.9 percent in 2014. The IMF has recently held discussions on the common policies of members of the ECCU and positively concluded missions to Antigua and Barbuda, Grenada, and St. Kitts and Nevis.
Special Country Reports: Labor and Social Programs
In the special country reports, we describe the main social and labor programs and policies for each country. We analyze the performance of the labor markets, in particular unemployment rates as they remain high in the Caribbean countries in comparison with other regions. Moreover, the number of social programs has been increasing in the last decade but there is little information if they are well directed and have been successful.
While the Caribbean has launched several social and labor programs in the past two decades, systematized information on the nature and extent of these programs along with robust evidence on their effects continues to be scarce. The Caribbean department at the IDB has been working to have a better understanding of these programs. In this issue, the Regional Report describes the main social and labor programs in The Bahamas, Jamaica, Suriname and Trinidad and Tobago and their corresponding monitoring and evaluation systems.