Guyana and Haiti are projected to have the highest rates of growth this year in the Caribbean, according to the United Nations World Economic Situation and Prospects 2014 (WESP) report.
Both countries are expected to see growth rates of 4.5%, above the Caribbean average of 4.1%. By comparison, Barbados’ growth is projected at 1%, Cuba at 3.9%, the Dominican Republic at 3.5%, Jamaica at 1.2% and Trinidad and Tobago at 2.5%.
WESP is produced at the beginning of each year by the UN Department of Economic and Social Affairs
(UN/DESA), the United Nations Conference on Trade and Development (UNCTAD) and the five United Nations regional commissions.
The recently released report cautioned that economic growth remains subject to growth in other economies, mainly the euro area, the United States and China, which are expanding at a slower pace than in previous years.
In addition to external risks, the report said that countries in Latin America and the Caribbean face high volatility of capital inflows. The report argued that the region will have to coordinate fiscal, monetary, and exchange-rate policies in order to preserve financial stability and boost economic growth.
It said that the Caribbean region is still struggling to bounce back from the impact of the global financial crisis in 2008.
“External demand has been subdued, particularly for the tourism sector, given the relatively slow economic recovery in the US and Europe. Weaker commodity prices have also affected exporters in the Caribbean, while domestic demand has been relatively weak following fiscal austerity measures and high levels of unemployment”, the report projected.
It said that the anticipated economic recovery in developed economies is expected to lift the tourism sector and have an indirect benefit in other sectors.
With the US Federal Reserve gradually tapering its Quantitative Easing programme—which seeks to stimulate the economy by purchasing government bonds and other long-term financial assets – private capital flows to Latin America and the Caribbean are expected to slow down, contributing to currency depreciations and volatility in stock markets, the WESP report said. On a positive note, it said that the region has accumulated abundant international reserves which allow some room to deal with currency volatility.
Guyanese economist Tarron Khemraj recently pointed out in a Stabroek News column that foreign currency inflows to Guyana were significantly down and there has been pressure on the exchange rate. He said that Bank of Guyana interventions in the foreign currency market have seen net international reserves falling from US$825.2m as at December 2012 to US$653m as at November 2013.
The WESP report also warned that Latin America and the Caribbean face higher economic vulnerability as countries are experiencing fiscal deficits and current account deficits. It said that market pressure will require bolstering fiscal accounts, while social pressure for better public services is increasing, as witnessed by large-scale protests in some countries of the region.
