Amid rising economic anxiety, a visiting economics professor last night put paid to any hopes of an immediate turnaround, as he delivered a stern warning to Barbados and its Caribbean neighbours that more economic doom and gloom lay directly ahead.
Professor Simon Johnson, a senior fellow at the Peterson Institute, made the grim prediction last night as he addressed the third Caribbean Economic Forum at the Grande Salle, Central Bank on the topic, What is Next for the Global Economy?
He warned that another global recession was on the way and would mostly impact countries in Europe.
The former chief economist at the International Monetary Fund (IMF) also cautioned Barbados and its regional neighbours of the spill-over effects of the likely downturn.
“You are exposed in many ways, through financial flows, absolutely, through the tourist business as we saw vividly in 2008,” Johnson, told the audience which included academics and business executives.
However, he could not say when the next financial crisis would strike nor would he go into detail about the negative effects.
But while stressing that he was not an expert on the Caribbean, the former IMF official zeroed in on the current problems affecting the region’s economies, suggesting there was need for better governance in order for countries to experience favourable growth.
He also called for further strengthening of financial institutions.
“I think that reforms need to be pursued diligently and much further,” said Johnson.
“We need more capital in the financial system, more equity financing,” he added, while warning that “a little bit of equity is not enough to withstand the damage or losses when the economy is not sound”.
Responding to questions posed by veteran Caribbean journalist Julian Rogers, Johnson emphasized that the Caribbean’s ability to withstand international economic shock had to do with the resilience of its financial system.
“We live in a world of volatility, so it is not going to be fine anytime soon,” he cautioned, pointing to commodity prices and developments in countries such as Brazil, China, Russia and Brazil.
“We have to think hard as to what are the sources of fragility in all our economies and how do we reduce those source of fragility and make ourselves stronger in the face of those shocks,” he added.
However, the visiting professor said he was “cautiously optimistic” that the region would find its way through the difficult times and return to growth, even though he expressed disappointment that the current age was one of “diminished expectations” when it comes to economic growth.
“When I was chief economist of the IMF we thought three per cent global growth was a recessional level growth. Now we see just four per cent or five per cent and people say, ‘oh well, that is not so bad’, but I think it is terrible. I think it is very disappointing,”Johnson insisted.
“What this really means is that millions of people around the world [are] living less productive and less healthy lives because the growth is not there,” he added.
In addition to better governance and a strengthening of the financial system, he also advocated for greater use of e-government a less onerous system for paying taxes and a better way of recording economic activity.
Pointing to the range of talent in the region, he also suggested there was need to encourage new business and entrepreneurship, while stressing that the adaptation of digital currency was also important.