Region urged to build resilience and diversify economies

The Caribbean Development Bank (CDB) is forecasting growth of 3.8 per cent for the region, as it warns that this growth was “clouded” by the ongoing uncertainty caused by the COVID-19 pandemic.

At the same time, the Bridgetown-based financial institution is forecasting that Barbados will witness the steepest decline in its debt to gross domestic product (GDP) ratio.

The CDB said in 2020, debt rose in every one of its borrowing member states except Guyana, adding that the regional debt-to-GDP average moved from 66.5 per cent to 79.5 per cent.

“In Barbados debt reached almost 150 per cent of GDP. While regional debt is projected to continue rising to 81.5 per cent of GDP in 2021, debt-to-GDP ratios are expected to fall in seven countries, with the steepest decreases in Barbados by 8.3 points to 141.2 per cent and in Jamaica by 6.7 per cent to 97.4 per cent,” the bank said in a release on Thursday.

In an unconventional method of releasing its annual regional report, the Barbados-based institution said it would be issuing several releases outlining aspects of its 2020 review and 2021 outlook.

The CBD announced earlier this week that it would have to forego its customary annual news conference due to “logistical constraints”, which it said it was experiencing because of the national pause instituted by the Government of Barbados to halt the spread of COVID-19.

It noted that the information to be disseminated would be segmented by topic and issued on separate days.

In the first release on Thursday, outgoing President of the CDB Dr Warren Smith warned that countries in the region should move with speed to diversify their economies while providing adequate social security safety net for the most vulnerable.

“The pandemic has underscored the importance of building economic and social resilience. We can only reduce the susceptibility to external shocks when we accelerate the diversification of our economies, broaden our productive base, and take appropriate measures to build competitiveness whilst providing adequate safety nets toprotect our most vulnerable groups,” said Smith.

The CDB described 2020 as an extremely difficult year, which saw the economies of its 19 borrowing member states contracting by 12.8 per cent on average as a result of the ongoing health pandemic.

Guyana was the only regional economy to record growth of 26 per cent, which was “solely due to the start-up of its first oil production”.

The CDB explained that this growth rate was lower than expected due to lower global oil prices, which it said also contributed to the -11.1 per cent economic growth in Trinidad and Tobago.

“In 2020, the majority of borrowing member countries registered double-digit declines in gross domestic product. Countries with significant tourism industries, such as The Bahamas, Barbados, Belize, Cayman Islands, Dominica, and Grenada, were hard-hit by a more than 70 per cent drop in overnight visitors in 2020, which spilled over to affect other economic sectors,” the CDB said.

It pointed out that an increase in agricultural production in Jamaica was not enough to prevent that economy from shrinking by 10.4 per cent.

It is estimated that the Barbados economy declined by 17.6 per cent in 2020.

The CDB pointed out that the fall in economic activity across the region last year led to steep decline in government revenues.

“At the same time, governments increased expenditure to support health sectors and to provide social support and economic stimulus. Primary fiscal balances worsened in every borrowing member country, averaging -4.1 per cent of GDP, compared with -1.3 per cent in 2019,” the bank said.

“Increases in unemployment rates were recorded in many countries, including The Bahamas, Belize, Cayman Islands, Grenada, and Jamaica, and are expected in most others. Unemployment rates were generally higher for women and for young people,” it added.

In its outlook, the CDB said while it did not expect a return to 2019 tourism levels this year, it expected tourism-dependent borrowing member countries to experience some economic recovery, to be led by Anguilla, where GDP is expected to increase by 10.9 per cent.

“This recovery is underpinned by a gradual return of tourists, which is expected in the fourth quarter of the year, and focused efforts to roll out mass vaccination programmes throughout the region. However, recovery is subject to risks such as new waves of infection and possible new variants of the virus and widespread availability of vaccines for some countries,” the bank noted.

Expected oil price increases along with production expansion should contribute to projected GDP growth of 8.4 per cent for Guyana in 2021, the CDB said. The bank also predicted that higher oil prices will also support modest economic growth of 0.3 per cent in Trinidad and Tobago.

The CDB said “When the pandemic diminishes, countries must continue to address the enormous economic challenges that confront the region. Accelerated programmes to strengthen macro˗fiscal frameworks and broad-based structural reforms are required to address the development constraints limiting productivity and growth.”
(marlonmadden@barbadostoday.bb)