-World Bank Global Economic Prospects report
Even as some Caribbean governments and business sectors continue to make optimistic noises arising out of indications of a turnaround in the global economy a new World Bank report has forecast a more prolonged negative impact on economies of the region that could persist for up to another decade.
The World Bank’s Global Economic Prospects (GEP) 2010 report released two weeks ago in Thailand specifically identifies Latin America and the Caribbean as two regions that will have to forego economic growth at “boom year levels” as a result of reduced levels of overseas investment. The report predicts that the fallout from the crisis will change the landscape for finance and growth over the next ten years.
While the report estimates that economic growth in the Caribbean in 2010 and 2011 will reach levels of 3.1 per cent and 3.6 per cent respectively, it declares that the region, like other developing areas, will be faced with higher borrowing costs, lower credit levels and reduced international capital flows resulting in more prudent lending assessments designed to curb some of risks that attended the boom period that preceded the crisis. “As a result, over the next five to seven years …growth rates in developing countries may be 0.2 to 0.7 per cent lower than they would have been had finance remained as abundant and as inexpensive as in the boom period.”
According to the World Bank report the anticipated pedestrian pace of economic recovery in the Caribbean will be no more than modest recovery in the remittances and tourism sectors resulting from weak labour market conditions in the United States and other developed countries.
The World Bank report indicates that while “sound macro-economic fundamentals” enabled Latin America and the Caribbean to weather the current crisis much better that it did earlier ones, the sharp declines in industrial production and international trade, two hallmarks of the crisis, resulted in a 25 per cent fall in regional exports during the first several months of the crisis while falling commodity prices resulted in an even sharper fall in the value of exports.
Accordingly, while industrial production in Latin America and the Caribbean has been recovering at an annualized pace of 9.8 per cent in recent months it means that the economies of the region could take a considerable time to fully recover.
Meanwhile, the gathering of more than 500 Latin American and Caribbean policy makers, business leaders and economists who met in Paris on January 25th have concurred with the World Bank’s assessment of the economic outlook for the region assessment. The forum, which focused on finding long-term solutions to the problems of poverty, inequality, liquidity and access to credit facing the region credited the region with improved macroeconomic management, more efficient structural policies and a vigorous business sector though Secretary General of the Organization for Economic Corporation and Development (OECD) Angel Gurria declared that the time had come for a new stage in the region’s development. That stage, he said, must be underlined by the promotion of economies based on knowledge, innovation and green growth “That will make possible a robust and sustainable increase in living standards.”
Critical to immediate-term multilateral aid flows to the Caribbean could be the extent of the commitment by the Inter-American Development Bank (IDB) to responding to the catastrophic humanitarian crisis resulting from last month’s devastating earthquake in Haiti. At the Paris forum IDB President Luis Alberto Moreno focused much of his presentation on the importance of providing aid to the crippled CARICOM member state which comprises both immediate-term emergency assistance as well as longer term initiatives working with other organizations and donors to provide a substantial flow of grants for Haiti’s reconstruction and development.