By: Staff Writer
January 11, 2022
The key for the Caribbean refocusing on growth post COVID-19 pandemic is to develop its digital infrastructure says the Inter-American Development Bank (IDB).
The IDB, in its just-released Caribbean Quarterly Economic Bulletin, asserts that the Caribbean needs to focus on developing its digital infrastructure to spur economic growth.
This bulletin, moving past the COVID-19 pandemic to some degree, went back to the bank’s roots of economic development and structural reform promotion.
The report said: “To this end, this edition reviews the long-term performance of economic growth and productivity in the region. It then draws on research from the IDB’s Connectivity, Markets, and Finance Division that estimates how much investment in digital infrastructure is needed for countries across Latin America and the Caribbean to reach the levels of advanced economies. This research also estimates both the potential economic benefits associated with that investment and its costs, highlighting the potentially large multipliers associated with closing digital infrastructure gaps.
It added: “As the pace of technological advancement has accelerated, culminating in the information technology revolution, the importance of this sector has and will only continue to grow. The ongoing pandemic is transformative, and has accelerated pre-existing trends favouring digital services, workplaces, and ways of doing business. Investment and innovation in related areas have been led by the world’s most advanced economies, creating the potential for new development challenges with the potential to inhibit the ability of other countries to “catch up” with advanced economies.
“For three of the six economies—The Bahamas, Trinidad and Tobago, and Barbados—, the potential benefit in terms of the cumulative positive impact on growth could be between 23 and 58 times the associated costs. In each of these three cases, the estimated cost of closing these digital infrastructure gaps is relatively small— under 1 percentage point of GDP in each case. For Guyana, Suriname and Jamaica, benefits are also potentially significant, despite relatively higher costs. For example, in the case of Jamaica, estimates suggest that the yield in terms of cumulative GDP benefits over time could be as much as eight times as much as the costs of investment.”
The report also said: “Reviewing the Caribbean’s historical economic growth performance in a comparative context gives cause to focus on the potential impact of digital infrastructure investment in accelerating growth. As noted in previous editions of this Bulletin and related research, real GDP growth in many Caribbean countries has, on average, lagged that of comparable economies around the world. In addition, for many of the six Caribbean countries examined here this relative performance has, on average, deteriorated over the past several decades.
“All of the Caribbean economies examined here have experienced at least one decade with average growth of 1 percent or less since the 1970s, while three have suffered at least one decade characterized by negative growth, on average. The Caribbean economies have also underperformed relative to other small economies around the world. Finally, with the exception of Suriname and Trinidad and Tobago—two resource-exporting economies that benefited from a sustained commodity price boom from about 2000 to 2014—it is also clear that the relative growth performance of the Caribbean economies has deteriorated over the past five decades. Even commodity-exporter Trinidad and Tobago experienced a ‘lost decade’ of growth from 2010 to 2019, and the estimated sharp decline of GDP in Suriname in 2020 wiped out much of the previous decade’s economic growth.”
Ultimately the report reverts to the damage wrought by the COVID-19 pandemic, “The poor and deteriorating relative performance of these Caribbean countries, even prior to the COVID-19 pandemic, has many drivers and antecedents. As small and open economies, they are all highly dependent on external demand as an economic engine. The COVID-19 crisis, as well as previous global economic shocks, have certainly had outsized implications for tourism and services, manufacturing, and commodities exports for most countries in the region. Similarly, most are island or coastal economies that suffer from outsized exposure to the ravages of natural disasters and climate change. These and other shocks have undermined macroeconomic stability and complicated policymaking. Economic and other institutional structures have also long suffered from deficits in terms of capacity and structures that have held the countries back.”