Look to 2022 for big economic boost after modest gains this year – ECLAC

The economy is projected to grow by 7.5 per cent in 2022, according to a United Nations economic agency, after modest growth this year.

Growth of around 3 per cent is forecast for this year, the Economic Commission for Latin America and the Caribbean (ECLAC) said Wednesday. The figure is in line with this year’s projections from the Central Bank of Barbados.

At the same time, the Chile-based organization is warning of worsening long-standing structural problems as a result of the COVID-19 pandemic that could affect economic growth throughout the Caribbean and Latin America.

Caribbean economies should experience average growth of 4.1 per cent this year and a 7.8 per cent boom next year, ECLAC said.

Much of this growth is being driven by forecasts of an economic boom for now oil-rich Guyana with massive growth rates of 16 per cent this year and 32 per cent in 2022.

Despite the positive forecast, ECLAC said in its annual report that for the wider Caribbean and Latin American region, the structural problems that have limited economic growth for decades were exacerbated by the pandemic and will limit the recovery in economic activity.

In contrast to the Caribbean, the wider Americas region is projected to grow by 5.9 per cent after a slow down to a 2.9 per cent growth rate next year, said the UN agency.

The report, titled Labour Dynamics and Employment Policies for Sustainable and Inclusive Recovery Beyond the COVID-19 Crisis, points to low investment and productivity, labour informality, high unemployment, inequality and poverty as some of the problems that have affected growth over the years.

“That is why recuperating investment and employment, especially in environmentally sustainable sectors, is key to a transformative and inclusive recovery,” it said.

“Before COVID-19, the region was already on a path towards stagnation. In the six-year period between 2014 and 2019, it grew at an average rate of 0.3 per cent, below the average of the six-year period that includes the First World War (0.9 per cent) and the Great Depression (1.3 per cent).

“In addition, it has seen a steady decline in investment, reaching one of its lowest levels in the last three decades in 2020 (17.9 per cent of gross domestic product). Similarly, labour productivity is falling significantly.”

The report indicated that the viral pandemic led to a sharp decline in workforce participation, particularly among women.

ECLAC’s Executive Secretary Alicia Bárcena acknowledged that middle-income nations, which include the majority of countries in the Caribbean and Latin America, were more at a disadvantage when it came to certain measures to help improve the economic climate.

“In order to maintain expansionary fiscal and monetary policies, the region’s countries must complement domestic resources with greater access to international liquidity and with multilateral mechanisms that would facilitate debt management, if necessary,” said the senior UN official.

“Multilateral initiatives are needed to face uncertainties about vaccination and developing countries’ access to financing under adequate conditions.”

ECLAC proposed that countries channel investment into promoting “a new development pattern that can boost competitiveness and employment, and reduce the environmental footprint”.

It suggested investments in the transition towards renewable energy; sustainable mobility in cities; the digital revolution, to universalize access to technology; the health-care manufacturing industry; the bio-economy and ecosystem services; the care economy; the circular economy; and sustainable tourism.

Bárcena added that countries should expand programmes that foster employment, especially among women and youth; spearhead policies for the reactivation of productive activities that were severely affected by the crisis, such as commerce and tourism; extend and deepen support programs for Micro, Small and Medium-sized Enterprises (MSMEs); and strengthen the care economy.

The ECLAC report emphasized that fiscal policy should accelerate public investment and incentivize and attract private investment. To make fiscal policy sustainable, it said it should be a priority for tax revenue to be bolstered and evasion to be reduced.

“In this area, greater access to international liquidity and multilateral mechanisms that would facilitate debt management would contribute to expanding the region’s fiscal and monetary policy space.” (marlonmadden@barbadostoday.bb)