(Jamaica Observer) – Increased tourism and remittance flows from the US are key to the recovery of Caribbean economies in 2011, stated Jim Flaherty, minister of finance for Canada in an International Monetary Fund (IMF) address.
“Weak conditions are expected to persist through most of 2010, with a mild strengthening towards the end of the year and into 2011. This is dependent, of course, upon a strengthening in tourism receipts and remittance inflows — mainly linked to the improvement in household confidence in the United States. It is also conditioned upon better prices for commodities exports,” stated Flaherty in a statement prepared for the IMF’s International Monetary and Financial Committee of the Board of Governors posted last week on the IMF’s website.
Flaherty’s comments followed the unveiling of the World Economic Outlook Report last week in which the IMF predicted that the Caribbean’s growth would lag behind Latin America and other parts of the world during 2010 but rebound in 2011.
Specifically, the Caribbean, Central America and the Western hemisphere are projected to grow 1.5 per cent, 2.7 per cent and 4.0 per cent respectively in 2010; then 4.3 per cent, 3.7 per cent and 4.0 respectively in 2011. Jamaica, however, is projected to trend well below its peers at negative 0.3 per cent in 2010 and 1.5 per cent in 2011.
“My Caribbean counterparts are grateful for the support that the IMF and other international financial institutions (IFIs) have provided and continue to provide to Haiti,” he said. “The Caribbean economies are still facing significant challenges in the aftermath of the global economic crisis, with a very lagged pace of recovery projected. Therefore, fiscal and external sector pressures remain highly elevated.”
He said that international financing for the region is justified as the Caribbean economies are vulnerable to shocks.
“In this regard, more focus will have to be directed at supporting initiatives that enhance the region’s resilience to domestic and external shocks, natural disasters, and the effects of climate change,” he added.
Many Caribbean economies rely heavily on tourism such that in Jamaica it represents 20 per cent of GDP and half of foreign exchange earnings. The Caribbean for the IMF comprises Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, Dominican Republic, Grenada, Guyana, Haiti, Jamaica, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Suriname, and Trinidad and Tobago. Central America comprises Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama.
Last week chief of the IMF’s World Economic Division Petya Koeva Brooks told the Caribbean Business Report that the Caribbean is among the most affected by the global crisis. She said that the region has the second-lowest projected growth rates for 2010/11 in the world following eastern Europe.
Earlier this year Jamaica secured a US$1.3-billion loan facility from the IMF and has struggled to pass the first test set by the renown multilateral body. Although unwilling to comment on that specific programme, Brooks did say the big challenge for the region remains to consolidate the fiscal balances in a way that really minimises the impact on growth.
“Growth in Latin America and the Caribbean has rebounded, led by strong domestic consumption. Production levels have increased sharply, especially in Brazil. The ongoing recovery has been supported by improving financial conditions. Equity prices have reversed their declines and even exceeded pre-crisis levels in some economies. Despite accommodative monetary policies, good fundamentals are helping the region reattract capital flows, leading to currency appreciation in some cases,” stated the 195-page report.
Jamaica recorded the second-highest inflation rate and the sixth-lowest estimated growth rate among 33 regional nations in 2009, according to the recently published Annual Statistical Yearbook by the Economic Commission for Latin America and the Caribbean (ECLAC). The island trailed the region’s trend data in regard to foreign direct investment (FDI), debt reduction and other data over eight years.