The World Bank has revised downwards its growth forecast for Barbados as it warned of continued struggles with the COVID-19 pandemic and its aftermath in emerging and developing economies, despite a fast global post-recession recovery.
The international financial institution also cautioned, in its June 2021 Global Economic Prospect report, that recovery in the Caribbean and Latin America could be severely impacted by major disruptions related to natural disasters.
In the case of Barbados, the World Bank’s latest prediction is for growth to be about 3.3 per cent this year before climbing to 8.5 per cent next year. This is less optimistic than the 4.4 per cent the World Bank forecast for this year, back in March. At that time it had predicted a growth rate of 7.2 per cent for Barbados in 2022.
At the end of April, the Central Bank predicted a growth rate of between one and three per cent for Barbados for 2021.
The World Bank report, which was released Tuesday, said the Latin America and Caribbean region was expected to record economic growth of 5.2 per cent this year, assuming moderate progress in vaccine rollouts in most countries, eased mobility restrictions, positive spillovers from advanced economies, and a rise in commodity prices.
“Growth is projected to wane to 2.9 per cent in 2022. A full recovery to pre-pandemic levels of output will be protracted in much of the region. In 2022, per capita gross domestic product in the region is projected to be 1.5 per cent below its 2019 level,” it said.
It pointed out that “the region continues to be severely affected by the COVID-19 pandemic and new cases have spiked after slowing in early 2021”.
According to the World Bank, international tourist arrivals were at a small fraction of pre-pandemic levels in much of the Caribbean, and given fiscal strains and an assumption of progress in combating the pandemic, spending and tax relief related to COVID-19 was winding down in most countries.
“Yet, the effects of the pandemic remain severe [and] employment has not returned to pre-pandemic levels. Income losses have worsened poverty and food security in many countries,” it added.
“Risks to the outlook are predominantly to the downside, including slower than expected COVID-19 vaccination, surges in new cases, adverse market reactions to strained financial conditions, and disruption related to social unrest and natural disasters. The durability of the recovery is highly contingent on containment of the pandemic.
“Disruptions related to natural disasters are a persistent risk to the region. In the longer term, failure to pursue policies to heal from the damage caused by the pandemic, such as investing in new technology and infrastructure, would weaken prospects,” added the World Bank.
However, it said an upside risk to the forecast was stronger than expected spillovers through trade and confidence channels from the strong growth rebound in the United States.
Overall, the World Bank said, the global economy is expected to expand 5.6 per cent this year. Despite the recovery, global output will be about two per cent below pre-pandemic projections by the end of this year.
“Per capita income losses will not be unwound by 2022 for about two-thirds of emerging market and developing economies. Among low-income economies where vaccination has lagged, the effects of the pandemic have reversed poverty reduction gains and aggravated insecurity and other long-standing challenges,” it said.
President of the World Bank Group David Malpass said while there are welcome signs of global recovery, the pandemic continues to inflict poverty and inequality on people in developing countries around the world.
“Globally coordinated efforts are essential to accelerate vaccine distribution and debt relief, particularly for low-income countries. As the health crisis eases, policymakers will need to address the pandemic’s lasting effects and take steps to spur green, resilient, and inclusive growth while safeguarding macroeconomic stability,” Malpass said. (marlonmadden@barbadostoday.bb)
