IDB warns oil price hikes could pose threat to economic recovery

Economic recovery has started in the Caribbean but a rise in oil and natural gas prices could spell trouble for Barbados and other non-producing states in the region, the Inter-American Development Bank (IDB) has warned.

The Bank’s first quarter edition publication for 2022, Caribbean Economics Quarterly – formerly Caribbean Quarterly Bulletin – notes that “an incipient recovery is underway in the Caribbean, although average growth there lagged regional and world averages in 2021”.

Despite the external shocks of the last year and a half of the COVID-19 pandemic, it said, international reserves increased in most Caribbean countries, with Barbados and Suriname showing the largest jump during the last year.

However, the IDB added, “the global economic recovery and supply factors have pushed up oil and natural gas prices. That is good news for some countries [including] Guyana, Trinidad and Tobago and Suriname and bad news for others, [including] the Bahamas, Barbados and Jamaica”.

“Inflation has increased modestly, driven by fuel prices and other supply chain issues globally. Following its maxi-devaluation, Suriname is a notable exception,” it added.

The IDB authors further noted that the debt-to-gross domestic product (GDP) ratio had also increased in some countries and this needs to be addressed.

“Clearly, more robust economic growth would help,” stated the publication which examined the region’s economic performance for 2021, using a series of graphs with limited text.

The report noted that lagging vaccination rates remain a concern in the region, especially with the arrival of the Omicron variant at the end of last year.

“Vaccination remains the key technology for avoiding cycles of infection and lockdowns,” it said.

The report indicated that the recovery of the tourism sector was underway globally and regionally, while adding that during the third quarter of 2021, international visitors to the Caribbean reached 77 per cent of the level of the third quarter of 2019.

In the case of Barbados, the review indicated that tourist arrivals remained subdued during 2021 despite an incipient recovery in air arrivals, and the cruise sector started to recover in the last quarter of the year.

In relation to the island’s indebtedness, the IDB report said “although debt levels have remained stable, the composition has shifted towards external debt due to the increased reliance on loans from international financial institutions since 2018”.
marlonmadden@barbadostoday.bb