The debt trend in Guyana needs to be reversed, Director of Economics at the Caribbean Development Bank (CDB), Dr Justin Ram says.
“It is particularly important that countries bring their level of indebtedness within sustainable levels since if this is not achieved, debt will be a drag on growth in the future and will have a negative impact on the daily lives and well-being of the ordinary citizens,” he said at the CDB’s annual press conference in Barbados yesterday. Ram and President of the CDB Dr Warren Smith reviewed the bank’s performance and that of its borrowing member countries as well as the outlook for 2015.
According to Ram, Jamaica, Grenada and St. Kitts and Nevis saw improvements in their debt levels while the levels of indebtedness and fiscal deficits in Barbados, St Vincent and the Grenadines and St Lucia are a concern. “Of the lower-indebted countries, the trends in Bahamas and Guyana need to be reversed,” he said.
Meantime, the CDB officials projected regional economies to grow by an average of 2% this year with expansion expected in all 19 Borrowing Member Countries (BMCs). “This is not stellar and will be led by growth in Guyana, Haiti, Suriname and St Kitts and Nevis,” Ram said. He said that they expect modest growth in the remaining economies, led by improved mining activity in commodity producers.
A statement from the CDB also said that there were improvements in foreign exchange reserves. However, reserves fell for another year in Guyana, Barbados, Haiti and Suriname.
According to the bank officials, preliminary indications are that external current account balances in most BMCs were positively influenced by the strengthening recovery in tourism, in terms of travel receipts, as well as continued inflows of remittances. “However, the reduction in international commodity prices had both positive and negative effects on merchandise trade balances, reducing import bills in most BMCs, but also curtailing export proceeds among major commodity exporters,” the statement said.
It added that there were indications too of most BMCs benefitting from increases in foreign direct investment (FDI), particularly for tourism-related construction. Consequently, foreign exchange reserves rose in The Bahamas, Belize, the ECCU, Jamaica and Trinidad and Tobago, representing significant turnarounds in performance in The Bahamas and Jamaica relative to deteriorating reserve positions in 2013.
“The CDB notes, however, that notwithstanding the ongoing recovery and positive outlook for 2015, the need for further fiscal consolidation and greater savings means that much of the impetus for growth and job creation must come from the private sector, including through FDI,” the statement said.
According to the Bank, the private sector will also have to shoulder more of the financial burden of investing in the Region’s social and economic infrastructure. To encourage this, the CDB says it is rolling out new facilities to support BMCs that are increasingly turning to public-private partnerships.
At the same time, the Bank is urging governments to undertake structural and other reforms to create the kind of legal and regulatory environment and broader governance framework that can attract investment, and within which the private sector can truly become the main engine of growth.
Meantime, as was the case last year, most regional economics are set to grow by between 1% and 3% with strongest performances expected in tourism and construction, along with some improvement in commodity exports. The Bank’s preliminary forecast also reflects an anticipation of moderate improvements in the economies of the region’s major trading partners.
Ram noted that whereas Guyana and Haiti led the region in 2013 in terms of the highest growth rate, in 2014 the fastest rates were estimated for St. Kitts and Nevis and the Turks and Caicos islands which experienced growth of 4% and higher. “Bauxite production continued to decline in both Guyana and Suriname while growth in alumina output in Jamaica slowed as lower prices signaled reduced global demand,” he said. Gold output also fell in Guyana and Suriname notwithstanding continued investment in the sector as prices fell further.
Ram said that unemployment remains stubbornly high throughout the region and informed that a major study on youth unemployment in the region will be published by the CDB in May.
According to the Bank, while its preliminary estimate of regional growth in real Gross Domestic Product (GDP) of 1.3% for last year is slightly lower than the revised figure of 1.7% for 2013, there is cautious optimism of further strengthening of the regional recovery.
Fastest growth rates for 2014 were estimated for the more tourism-dependent economies. St. Kitts and Nevis and the Turks and Caicos Islands experienced accelerated growth of around 4%, based on the strengthening recovery in tourism and continued investment inflows for mainly tourism and real estate-related construction. Ram said that almost all regional destinations for which data were available recorded increased visitor arrivals last year.
Meanwhile, despite falling commodity prices and other challenges that impacted mining and quarrying activity, some large commodity exporters were also able to grow quite rapidly, although driven by the services sector.
There were a few exceptions to the overall economic recovery, however. Trinidad and Tobago, which accounts for nearly a third of the Region’s total GDP, slowed considerably to record modest growth last year. The CDB said that this came in the wake of operational challenges and the significant drop in oil prices during the year which suppressed petroleum output, thereby driving a decline in the mining and quarrying sector.
In a few other BMCs, continued underperformance in key sectors contributed to flat or declining economic activity. Barbados and the British Virgin Islands (BVI) stagnated for the seventh consecutive year in 2014. Marginal growth was estimated for Barbados, as weak performances in tourism, international business and construction were not enough to compensate for declines in manufacturing and agriculture.
Elsewhere, sizeable economic contractions in St. Lucia and St. Vincent and the Grenadines in 2014 partly reflected the impact of a severe storm just before the start of the year, which worsened pre-existing, chronic weaknesses in critical sectors, the Bank said.
Referring to the other major sector contributing to the regional recovery, the CDB said continued expansion in construction activity in most BMCs was primarily led by the private sector. Much of this was related to tourism and other commercial development, as well as strong growth in residential building in some territories. Growth in the sector was also stimulated by public sector capital investment in several countries, the statement said.
The CDB reported mixed performances in manufacturing, with three of the top five regional manufacturers showing moderate-to-strong growth and two declining. Solid expansion in the non-petroleum segment of the sector in Trinidad and Tobago was boosted by the economic recovery in the rest of the Region. This heightened demand for its export products, including food, beverages, chemicals and especially cement, consistent with the upward trend in construction. Haiti and Guyana were the other two major manufacturers that posted growth.
According to the CDB, agriculture also had mixed fortunes, with some of the major agro-producers reporting robust growth, whereas adverse weather conditions and crop disease negatively affected others.