By: Staff Writer
June 11, 2023
The World Bank’s “Regional Private Sector Diagnostic: Promoting Private Sector-led Growth to Foster Recovery and Resilience in the Caribbean,” report said that the Caribbean is growing at half the rate of real GDP when compared to emerging markets.
Isaac Solomon, vice president of operations at the Caribbean Development Bank, said at the report’s launch that the “catalyst” in the development paradigm is the quest to achieve “production resilience,” in the private sector.
Mr Solomon also said: “We cannot overstate how critical private sector development is to the future of the Caribbean. A vibrant private sector can spur economic growth and job creation can harness the creativity and ingenuity of the people of this region to build new industries and compete in the global market space and a vibrant private sector can accelerate the drive to end poverty and propel prosperity across the Caribbean.”
The private sector in the Caribbean has been plagued with years of under-performance, burdened by bureaucratic red-tape in almost all English speaking jurisdictions, coupled with poorly trained labour markets that provide little to no dynamism to industry. “Limited diversification affects the pace of growth; the CARI-12 economies are relatively concentrated in one or two major sectors and are therefore highly vulnerable to economic shocks and volatility,” the report laid out.
Ryan Straughn, minister of finance, Barbados, said: “I think that as we reflect on what is required really to unlock private sector investment, that we really must take stock of one: What is happening within governments across the region, from a bureaucratic administrative perspective; two: What is happening with respect to the overarching financial system, which is supported certainly by the World Bank, IFC CDB, IDB and others who are here; and how we interface with each other, in order to create the appropriate environment for the private sector in the Caribbean, which is small by any measure, but we have had to be very dynamic in order to achieve the quality of living standard of living, that we all have come accustomed to in the region.”
The report also said: “In recent decades, real GDP in the CARI-12 countries has grown at roughly half the pace as that in other emerging markets and developing economies (EMDEs). Average annual growth in CARI-12 countries was 3.4 percent lower than in other EMDEs over the past two decades, averaging 2.9 percent between 2000 and 2010 and decelerating to 0.8 percent since 2011. The commodity-exporting CARI-12 economies (Guyana, Suriname, and Trinidad and Tobago) grew at an average annual rate of 2.2 percent between 2012 and 2021, compared to a rate of 0.4 percent in the tourism dependent economies (Antigua and Barbuda, the Bahamas, Barbados, Belize, Dominica, Grenada, Saint Lucia, St. Kitts and Nevis, and St. Vincent and the Grenadines).
“However, the difference is largely due to the pandemic-induced, double-digit contraction experienced by the latter group in 2020. In fact, the commodity-exporting countries grew more slowly than the tourism-dependent ones between 2012 and 2019 as a result of slumping oil prices.2 Overall, the spell of low growth throughout the CARI-12 over the last decade began as a repercussion of the Global Financial Crisis of 2007–08, with an accompanying fall in foreign direct investment (FDI) and tourism, as well as attendant fiscal challenges. FDI growth slowed across most of the CARI-12, from 27 percent year-on-year in the pre–Global Financial Crisis period to 18 percent between 2009 and 2019. Beyond the averages, FDI flows into the region are highly volatile— especially in tourism-dependent countries—with annual fluctuations ranging between -20 percent (in 2011) to +101 percent (in 2016) over the last decade.”
Mr Solomon added: “This is why production resilience, which I highlight previously, is one of the five pillars of the bank’s Strategic Plan update 2022 to 2024. In this vein, we have intensified our commitment to promoting economic diversification. And we are prioritizing a range of actions, which include enabling environment enhancement, MSME development, supporting international trade measures, and fostering increased economic integration.”
Pointing to the COVID-19 pandemic, the report noted: “The pandemic caused a severe fall of GDP in most of the CARI-12 in 2020, followed by uneven recoveries in 2021 and potential medium-term effects on growth and the fiscal outlook. Most tourism-dependent countries experienced double-digit contractions in real GDP in 2020—when international arrivals plunged by more than 65 percent— followed by a modest recovery in 2021. Commodity exporters, on the other hand, had mixed results. A collapse in oil and gas prices resulted in a loss of 7.9 percent of GDP in Trinidad and Tobago in 2020, followed by a modest recovery of 2.6 percent in 2021. In contrast, Guyana’s real GDP is estimated to have grown by an extraordinary 43.5 percent in 2020, as the country’s first oil sales after a full year of production more than offset a 7.3 percent contraction in the non-oil economy.”
As a result, growth is expected to be low moving further out of the pandemic, despite the strong rebound in 2022 for a majority of the tourism dependent economies.