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Caribbean recorded modest economic growth in 2013 – CDB

But the CDB said the region is likely to record average economic growth of 2.3 per cent in 2014.

“Led by Guyana, Haiti and Suriname, growth is expected for all 19 BMCs (Borrow Member Countries), with most again set to grow by one to three per cent.

“The recovery in regional tourism is expected to strengthen with the anticipated faster growth in the US and a return to growth in the Euro Area as well as expectations of improved airlift and reduced fuel costs resulting from further declines in commodity prices.”

The CDB said that this recovery, together with global FDI (foreign direct investment) growth projected at around 10 per cent in 2014 should have further spin-off benefits for construction and other real sector activity.”

In an “Economic Review and Prospects” for the bank’s borrowing member states, the Barbados-based financial institution said rising incomes and employment in advanced economies, coupled with renewed foreign direct investment (FDI) flows, contributed to solid growth in construction activity and continued recovery in tourism in most of the Caribbean.

It said the expansion in construction activity was linked to the combined effects of significant public investment in critical economic infrastructure, growth in private residential construction and significant FDI-driven tourism-related development.   

In the tourism sector, stay-over arrivals increased across destinations, as the recovery in key United States Euro Area markets continued. 

“The exceptions were Antigua and Barbuda, The Bahamas, Barbados, Dominica, Grenada and St. Vincent and the Grenadines, where airlift challenges and high intra-regional travel costs affected visitor arrivals,” the CDB noted.

It said the general uptrend in arrivals in the higher-value-added stay-over segment of the industry offset the impact of challenges in the cruise segment, where outturns were more mixed.  

Despite generally lower commodity prices, regional growth was led by commodity exporters. 

In Guyana, Haiti and Suriname, rates of expansion between four and sic per cent were driven mainly by strong construction and agriculture outturns and small, but noteworthy contributions, from the rapidly developing tourism industries.

“Growth in Guyana and Suriname was driven, as well, by continued investment in small-scale gold mining operations.  In Belize and Trinidad and Tobago, overall growth performances improved, in line with the general upturn in construction and tourism activity.”

The CDB said that Trinidad and Tobago also benefited from a rebound in manufacturing, as cement production recovered from the effects of industrial unrest in 2012. 

“Notably, the contraction in oil production in both of these countries was attributed, not to lower prices, but to ongoing maintenance issues, in one case, and to reduced oil field yield, in the other. “

The CDB said that economic growth did not exceed three per cent in the services-based economies; and in some instances, activity declined. 

It said moderate growth of between one and three per cent was recorded in Antigua and Barbuda, The Bahamas, Cayman Islands, Grenada, St. Kitts and Nevis, St. Vincent and the Grenadines and Turks and Caicos Islands was linked to the general improvement in construction and tourism.  

“Economic activity was sluggish, flat or contracted in the remaining BMCs, (Borrowing member countries) as key service industries bucked regional trends. Based on indications that a first-half contraction was negated by a turnaround in the agriculture, manufacturing and tourism sectors, in the second half of the year, Jamaica is estimated to have recorded no growth in 2013.” 

The CDB said that for Anguilla and Barbados, 2013 marked the sixth consecutive year of economic stagnation.

“The slight contraction estimated for Barbados was driven by declines in tourism and construction activity during the year.  Growth in Anguilla’s tourism, on the other hand, was offset by weak performances in construction and financial services.  Similarly, economic activity also declined in the British Virgin Islands and St. Lucia as growth in tourism activity failed to dampen the impact of declines in construction and financial services.  “

But the CDB said notwithstanding the strengthening of economic activity, inflationary pressures remained subdued and unemployment levels remained high across the region.

It said consumer price inflation, in most regional economies, continued to moderate, in line with international commodity prices.  Average inflation for the region is estimated at 2.3 per cent  in 2013, down from five per cent in 2011 and 3.5 per cent  in 2012.  Higher inflation in Jamaica was mainly linked to depreciation of the exchange rate.  

The CDB said four BMCs for which 2013 labour force data were available reported double-digit rates of unemployment. 

The Bahamas’ annual jobless rate, as measured in May, was 16.2 per cent and  the  year-to- September average for Barbados was 11.2 per cent while the average for the year-to-July was 15.9 per cent for Jamaica; and the first-half average for St. Lucia was 23.2 per cent.

“Reaching record highs in 2013, these rates represented job-less growth in The Bahamas and stagnant economic activity in Jamaica and St. Lucia.  Short-term employment programmes put in place by the government earlier in the year accounted for Barbados’ slight improvement over the corresponding period of 2012; but public sector lay-offs in the last quarter of the year may have offset this increase.”

The CDB said indications are that unemployment levels also remained elevated in most of the other BMCs, as job creation continued to lag the recovery in output.  

It said that outturns in relation to foreign exchange reserves varied; but import cover generally remained within accepted norms.

Reserves increased in Belize, the Eastern Caribbean Currency Union and Trinidad and Tobago, but fell in The Bahamas, Barbados, Guyana, Haiti, Jamaica and Suriname.  

“Most BMCs continued to hold reserves in excess of the 3-month/12-week benchmark.  With regard to BMCs operating flexible exchange rate regimes, the Guyana and Trinidad and Tobago dollars remained relatively stable (depreciating by under 0.5 per cent).

“The Haitian gourde depreciated 3.4 per cent as official transfers and financial inflows related to post-earthquake recovery and reconstruction tapered off.  The 14.6 per cent depreciation of the Jamaica dollar, on the other hand, was linked to increased foreign-currency demand.”

The region’s premier lending financial institutions aid that fiscal performance weakened in six of the nine most highly indebted BMCs. 

Government revenues declined as output contracted in Barbados and St. Lucia, whilst the abolition of tourism taxes and stagnating grant inflows that offset higher proceeds from the recently extended Economic Citizenship Programme helped to explain the declines in Antigua and Barbuda and Dominica, respectively.  

Increased capital spending in Antigua and Barbuda, and St. Lucia and wage increases in St. Vincent and the Grenadines also contributed to widening fiscal deficits.  In addition, St. Vincent and the Grenadines incurred sizeable expenditure on the construction of a new airport. 

“Consequently, and notwithstanding cutbacks in capital spending in Barbados, Dominica and Grenada, and Antigua and Barbuda’s successful completion of an IMF programme in June 2013, the ratio of Gross General Government debt to GDP rose in all of these BMCs.”

The CDB said preliminary estimates indicate that steepest increases were in St. Lucia (14 percentage points to 89 per cent) and Barbados (10 percentage points to 108 per cent).  

“The run-up in debt contributed to the credit downgrades given to Barbados, Grenada, St. Lucia and St. Vincent and the Grenadines by the rating agencies. On the other hand, successful debt restructurings during the year (Belize and Jamaica), as well as satisfactory progress on IMF-sponsored adjustment programmes (Jamaica and St. Kitts and Nevis) underpinned improved debt dynamics and prompted credit rating upgrades (Belize and Jamaica).” 

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