Regional economic growth took a tumble in 2019 but there are signs that the Caribbean will have a better year in 2020, according to the Caribbean Development Bank (CDB) which held its annual news conference earlier this month.
The Caribbean economy dipped from 1.6 per cent growth in 2018 to just 1 per cent in 2019 as it faced headwinds in construction and manufacturing. However, CDB President Dr William Warren Smith was quick to point out that the region’s lacklustre performance reflected a worldwide slowdown, saying: “Our Borrowing Member Countries recorded another year of low growth. This slowdown was consistent with relatively sluggish global growth of 2.9 per cent [as] the international economic environment continued to give mixed signals.”
He pointed to US-China trade tensions, geopolitical anxieties and rising social and environmental activism as some of the factors hampering growth worldwide and added that BMCs would have to push to reach their Agenda 2030 Sustainable Development Goals within the next decade.
Bright spots
There were pockets of growth in 2019, especially in the region’s biggest earner – tourism. This sector performed very strongly, recording expansion on every island. St Kitts and Nevis and the Cayman Islands saw double digit growth in their visitor arrivals while the Bahamas had its best year ever, despite Hurricane Dorian’s devastating passage in September.
The fastest growing economies in the Caribbean last year were Anguilla at 10.9 per cent and Dominica, whose economy expanded by 5.7 per cent. A number of islands saw substantial and welcome reduction in their debt to GDP ratio, with beleaguered Barbados managing to pull back its runaway debt from 126.9 per cent of GDP in 2018 to 119.5 per cent in 2019. Overall debt fell in 10 BMCs, with Barbados, Grenada, Jamaica and St Kitts and Nevis seeing the steepest declines.
“These BMCs are at various stages of implementing homegrown fiscal reform programmes,” noted Dr Smith who praised Barbados’ fiscal reform programme, which is being implemented with the help of a US$ 75mn loan from the CDB. “BMCs like Barbados, Grenada, Jamaica and St. Kitts and Nevis must stay on course with their home grown socio-economic reform programmes,” he added. “Others should join the bandwagon and commence, with alacrity, implementation of their own adjustment programmes.”
Growth from Guyana
Guyana is the island to watch this year, according to the CDB. The bank predicts that the start of oil production on the island will be a hugely impactful development, not just for Guyana but the wider Caribbean. Following a strong showing in its timber and gold industries in 2019, Guyana’s economy will boom this year when it hits its projected output of 100,000 barrels of oil a day.
“We want to be a partner in development for Guyana. The revenues they get from oil production will be an attractive asset for the development of the region,” said Dr Smith who added that the bank is forecasting 4.1 per cent regional growth in 2020 on the back of Guyana’s oil boom. “Guyana should dominate regional growth performance this year. Other growth drivers in the region should be the construction, tourism and agriculture sectors, but economic growth will remain lopsided and below the sustainable rates needed for long-term resilience.”
Project highlights
Building economic resilience is a key part of the CDB’s mandate and the bank says the region has a long way to go. According to CDB research, major vulnerabilities among the islands include dependence on strategic imports, export concentration and natural hazards.
The CDB’s portfolio in 2019 was tailored to combat these challenges, according to Dr Smith who said: “We are very proud of our contribution to the region’s development, and the transformation of people’s lives. Our interventions were underpinned by the imperatives of adaptation, resilience building, innovation and inclusion.”
Last year, the CDB approved US$ 347mn for capital projects, policy-based operations and technical assistance. It also increased disbursements by 8 per cent to the total value of US$ 305mn.
Projects in 2019 included a US$ 8.5mn grant to Saint Lucia to build resilience in the country’s agricultural sector, EUR250,000 to the Eastern Caribbean islands to help them prepare projects for consideration by the Green Climate Fund and Adaptation Fund, and a US$ 110mn loan to St Vincent and the Grenadines to modernise its Kingstown port.
Areas of future focus
Moving into the next decade, the CDB is targetting areas where it believes it can make the most impact and deliver long-term growth. These include the blue economy which, according to the bank, has the potential to grow island GDP by 7 per cent. Following successful efforts to promote the marine and coastal economy in Jamaica, the bank believes this is an area to watch, with CDB Director of Economics
Dr Justin Ram saying: “This signals to all of us that the blue economy has great potential and we should be investing more in it. We are no longer just small island developing states; we are big ocean developing states.”
Another area of focus in 2020 is climate resilient infrastructure. The CDB has approved “major” road and bridge infrastructure projects for Saint Lucia, Belize, Dominica and Guyana. It is also funding a US$ 29.8mn project to rehabilitate the sewage system in Barbados, and sending US$ 6.8mn to Belize to connect Caye Caulker to the national grid.
Entrepreneurship is also a priority for the CDB this year as it looks to help bridge the gap between idea and operation for start-ups and small businesses. The bank is currently considering how it can incentivise financial institutions to lend to SMEs.
“We feel that the small business sector has the potential for being the dynamic sector for driving economic growth and addressing some of the headline issues, that is, poverty and inequality in our countries,” said Dr Smith. “We have been examining very closely how CDB can find an entry point into that sector that would take us to a different level compared to the engagement we’ve had to this point. There are some exciting possibilities.”
Over the long-term, the CDB is looking inward. The bank is undergoing an internal revamp to better streamline its operations, making them more responsive to BMCs’ needs, encouraging better engagement and ensuring projects deliver faster and more efficiently.
Dr Ram said: “The Caribbean Development Bank underscores the need to build inclusive and resilient economies, to improve employment opportunities and quality of life for Caribbean citizens. Such economies are characterised by sound macro-economic management, environmental preparedness, human development, productivity and competitiveness.”
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