Two years of economic recovery: World Bank

The World Bank is forecasting the Barbadian economy will rebound from the coronavirus crisis with a growth rate of 4.4 per cent this year and 7.2 per cent growth in 2022.

The projection is contained in Renewing with Growth, a World Bank report on Latin America and the Caribbean.

It said: “With the quarantine measures and impact of the pandemic on tourism, Barbados’s GDP is estimated to have contracted 17.3 per cent in 2020. The current account deficit is expected to have increased to 7.8 per cent of GDP.

“Poverty is expected to have increased, reflecting the job losses, business closures, and decline in remittances caused by the pandemic. The pandemic interrupted the reform efforts made in the context of the Barbados Economic Recovery and Transformation (BERT) plan to sustain primary surpluses and reduce the debt burden.”

This comes as the hemispheric financial institution forecasts a slightly higher growth this year for Latin America and the Caribbean, compared to what it predicted towards the end of last year.

Pointing out that last year, regional economic growth fell by 6.7 per cent in Latin America and the Caribbean (excluding Venezuela) because of the pandemic, the World Bank said in the report that it was now forecasting growth of 4.4 per cent this year, compared to the four per cent growth it predicted at the end of last year.

The region suffered more health and economic damage from the COVID-19 pandemic than any other region, the report said.

But it declared that there was potential for significant transformation in key areas, adding that the immense disruption from the pandemic may lay the groundwork for higher productivity through economic restructuring and digitization.

“The damage has been severe and we’re seeing a lot of suffering, particularly among the most vulnerable,” said Carlos Felipe Jaramillo, World Bank Vice President for the Latin America and the Caribbean region.

“But we must always look ahead and seize on this opportunity to embrace the transformations needed to ensure a brighter future,” he added.

Noting that the pandemic had resulted in huge economic and social costs on regional economies last year, an increase in unemployment rates and poverty, the World Bank official said some countries were able to implement massive social transfers to cushion the social impact of the crisis.

ButJaramillo said the COVID pandemic will have a long-lasting impact on the economies of the region, with less learning and lower employment to reduce future earnings, while high public and private debt may create stress in the financial sector and slow recovery.

The World Bank report said while there were signs that economies in Latin America and the Caribbean were rebounding and there were hopes that the disruption could have some positive outcomes, the outlook for this year remained uncertain.

“Vaccine rollout has been slow in most of the region, and herd immunity may not be attained before the end of 2021 at the earliest. In addition, new waves of infection may come as new variants of the virus emerge. While actively preparing to build back better, protecting lives and livelihoods remains the priority,” said the Washington-based financial institution.

But despite the challenges, there were some “bright spots”, the World Bank said.

It said global trade in goods held up relatively well, despite the sharp drop in trade in services, especially tourism, and that remittances to the region were up compared to before the pandemic.

Martin Rama, World Bank Chief Economist for Latin America and the Caribbean, said as economies rebound this year, “some sectors will gain and others will lose”.

“The pandemic has triggered a process of creative destruction that may lead to faster growth, but may also amplify inequality within and across countries in the region. For example, hospitality and personal services may suffer long-term damage, but information technology, finance and logistics will expand,” said Rama, who said that over the medium-term, the gains could be larger than the losses.

The biggest transformation could come from accelerated digitization, which could lead to greater dynamism in financial intermediation, international trade and labour markets, the World Bank official added.(marlonmadden@barbadostoday.bb)