By: Staff Writer
June 4, 2024
The Inter-American Development Bank in a new report said that tourism growth in the Caribbean will be sustained in 2024 but likely with “less dynamism.”
The report, “Risks and Opportunities for Caribbean Economies in a Diverging World,” said: “Global demand for Caribbean tourism and commodity exports will be sustained, but likely with less dynamism. However, the current economic context also involves rising uncertainty about the course of macroeconomic policies, particularly in advanced economies, and ongoing geopolitical stress that could affect global supply chains.”
After the strong economic recovery of 2021–2023, Caribbean economies continue to grow at a somewhat faster pace than the Latin America and the Caribbean region, though country circumstances vary. For example, economic growth in Guyana is expected to be over 30% this year, while tourism-oriented economies are expected to grow only 2.6%.
At the same time, economies are experiencing diverging economic growth rates (with the US growing faster than others) leading to different approaches to economic policies. For example, the Eurozone may lower interest rates sooner and more decidedly than the United States. This situation could create both risks and opportunities moving forward.
The report also said: “There are underlying market forces that affect inflation everywhere, as has been the case in recent years. Supply shocks from international conflicts can substantially affect commodity prices. Weather events, such as the drought affecting the Panama Canal zone, can constrain supply chains, and droughts or floods can have a direct impact on agricultural production, which in turn places upward pressure on food prices. Climate change will add to these risks in unpredictable ways in the coming months and years.”
According to Anton Edmunds, General Manager for IDB’s Caribbean Country Department “Caribbean economies have recovered well from the pandemic and the recent global economic headwinds. Now is the time to focus on the structural reforms at both the national and regional levels to promote more robust and sustainable growth.”
The report added: “Supply chain pressures have also remained subdued, even if there are still possible risks ahead. The Federal Reserve Bank of New York has developed an index to track the evolution of these pressures called the Global Supply Chain Pressure Index. The index incorporates a variety of indicators such as freight costs, information from purchasing manager index surveys, and other indices from external sources (e.g., the Baltic Dry Index and the Harpex Index). The index is presented in terms of deviations from normal supply chain conditions, with a higher number indicating greater pressure (Figure 5). Technically speaking, this is measured in terms of standard deviations from the historical average. This can also be thought of as multiples of the average distance from the mean. As noted by prominent commentators,3 the spike in supply chain pressures, as measured by the index, coincides with the rise in inflation.”
The report also said: “Tourism-dependent Caribbean economies have broadly recovered from the COVID19 crisis, with arrivals having surpassed 2019 figures by 2023. The recovery was particularly strong in a handful of markets, notably The Bahamas and Jamaica, which have seen record-setting tourist arrivals. At the same time, there is some evidence that the increase in tourism in those locations is also being driven by nontraditional source markets, and this bodes well for a possible permanent increase in market share.6 On the other hand, Barbados, a tourism-dependent country that relies on European arrivals, has not fared as well, with 2023 arrivals below pre-pandemic levels. (Although, first quarter 2024 figures are now above the first quarter of 2019, as noted in the Barbados country section.) For countries such as Barbados, in particular, the economic downturn in countries like the United Kingdom, as well as potential devaluations with respect to the U.S. dollar, threaten to further delay recovery.”