The International Monetary Fund (IMF) is forecasting that the Barbados economy will expand by 4.5 per cent this year but growth will slow down next year and dip lower in five years.
It also warned that fresh fighting between Israel and Gaza could result in higher food and fuel prices for struggling regions like the Caribbean even as the global economy is still “limping along”.
According to the IMF’s World Economic Outlook released on Tuesday, after the 4.5 per cent GDP growth for 2023 – just over half the 9.8 per cent growth recorded last year –, the growth should slow to 3.9 per cent in 2024.
The 2028 figure projected is 2 per cent.
Last week, the World Bank predicted growth of 4.6 per cent for the Barbados economy this year, followed by 4 per cent next year and 3 per cent in 2025.
“Medium-term growth prospects have weakened since the global financial crisis, especially for emerging markets and developing economies,” Pierre-Olivier Gourinchas, director in the Research Department of the IMF, said at a press conference in Morocco to launch the report.
“The implications for these countries are profound,” he added, noting that lower economic growth in developing countries also means a much slower divergence towards the living standards of advanced economies, reduced fiscal space, increased debt vulnerabilities and exposure to shocks, and diminished opportunities to overcome the scarring from the COVID-19 pandemic and the war in Ukraine.
Gourinchas said the IMF was monitoring the Israel-Palestine conflict situation very carefully in terms of the economic impact it could have on the region and beyond.
“I think we have to be cautious. I think it too early to really assess what the impact might be,” he said, noting that the conflict erupted after the current projections were closed.
However, he noted that the IMF has observed that oil prices had increased by four per cent over the last few days.
“And, of course, this reflects the potential risk that there could be disruptions either in production or transport of oil in the region,” he stated even as he emphasised that it was too early to assess how much of those movements in oil prices would be sustained.
“The work we’ve done in the research department at the Fund suggests that if there is something like a 10 per cent increase in oil prices, this would weigh down on global output by about 0.15 per cent in the following year, and will increase global inflation by about 0.4 percentage points.
“So that gives you a rough idea of what the magnitude could be. But again, I emphasise that it’s really too early to jump to any conclusion here,” Gourinchas said. (BT)
