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Caribbean Region Quarterly Bulletin -May 2014
With the exception of Barbados, all of the Caribbean economies are recovering. External sustainability seems to be strong for Trinidad and Tobago. Jamaica is meeting International Monetary Fund program targets. Guyana’s economy remains strong, but debt levels are gradually rising. Suriname’s economy is growing, but the current account has now drifted from surplus to deficit.
Summary Of Recent Developments By Country
Economic activity in The Bahamas remained sluggish through the beginning of 2014. Tourism grew by 3.5 percent, with sea arrivals increasing and air arrivals declining, despite closure of a mid-sized hotel. Private sector credit growth moderated signaling a persistent weakness in the domestic market. The percentage of unemployed individuals persists in the doubledigits while inflation abated. Fiscal performance improved with the deficit contracting for the first 6 months. Furthermore, authorities have announced the possibility of adopting fiscal rules.
Barbados’ economy contracted in 2013 and is projected to deteriorate further in 2014 by about 0.7 percent. Tourism had a mixed performance with the decline in long-stays outweighing the increase in cruise arrivals. Unemployment remained high while inflation decreased. Fiscal outcome worsened as revenues were below expected levels, which led to higher debt ratios.
Guyana remained on its healthy growth trajectory and registered a remarkable 5.2 percent growth rate in 2013. The 2014 national budget is the largest in Guyanese history and is mostly driven by an expansion in capital projects. The rice, gold, and services sectors served as the primary drivers of growth, while sugar and bauxite underperformed. The AML/CFT bill has not yet been passed and carries serious reputational damage to the financial sector. The current account is expected to remain fully financed through capital flows and earnings.
Jamaica’s outlook improved toward the end of 2013, with the economy registering growth of 1.4 percent in Q4. The authorities committed to continue meeting the reform targets under the International Monetary Fund program and completed the third review in March 2014. Also, Fitch upgraded Jamaica’s long-term credit rating. Moody’s did not upgrade the rating but improved the outlook to positive. The Jamaican dollar’s depreciation continued, and reserves approached desirable levels; however, the consistent current account deficit has led to a steady worsening of Jamaica’s international investment position.
While Suriname’s economy grew around 4.7 percent in 2013, inflation continued to decline. A tight monetary policy supported the external position, but the current account moved into deficit at 4 percent of GDP. However, current and projected levels suggest that the external position should remain sustainable. The third and final volume of the 2012 census was also released.
Trinidad and Tobago
Growth in Trinidad and Tobago is expected to be robust as the energy sector began to recover with the estimates for 2013 at 1.5 percent. Seismic exploration activities reflect promising prospects for the energy sector. Unemployment fell to 3.7 percent in Q1 of 2013, and public spending is expected to increase before the 2014 election. Standard sustainability indicators suggest a sound external position.
Eastern Caribbean Countries
After experiencing a moderate expansion, the Eastern Caribbean Countries contracted in the first 9 months of 2013 year-on-year. As a result, prices fell and contributed to a narrowing of the merchandise trade deficit. Credit to the private sector expanded by 3.1 percent, while the tourism sector remained largely flat. Externally, the overall balance of payments narrowed and net international reserves increased.
Special Country Reports: External Sustainability
In the special country reports, we consider external sustainability in various ways that are consistent with the economic makeup of each country.
Regional Supplement: Kundalini Falling: Intertwined Fiscal And External Sustainbility
Although the global economy slowly improves and recovery is imminent, some significant risks still loom. Specifically, the risk of unexpected rises in interest rates in the United States and the decline of growth in China are directly relevant to the Caribbean region.
The Regional Report explores these risks and assesses whether economies in the Caribbean region are prepared to weather such exogenous shocks.