CDB projects regional economic growth of 5.7 per cent in 2023
According to a research released on Wednesday by the Caribbean Development Bank (CDB), which is based in Barbados, the region’s economies grew by an average of 10.3% last year, compared to 4.5 percent in 2021.
Isaac Solomon, vice president of operations at the CDB, stated at the bank’s annual news conference that the region’s growth was largely supported by increased energy production in Guyana and Trinidad and Tobago as well as higher global oil prices, which also contributed significantly to the 20.6 percent economic growth in the bank’s borrowing member countries (BMCs) that export commodities.
He said that in the nations heavily reliant on tourism, rises in extra-regional airlift led to a robust, albeit insufficient, rebound in the midst of rising inflation that stifled domestic demand and restrained growth in important economic sectors. With more tax receipts and better financial standing, this outcome supported the 4.6% economic growth that had been projected.
The CDB anticipates that despite numerous obstacles, the economic performance of BMCs will continue to advance over the medium term in 2023.
“It is difficult to anticipate growth with a high degree of certainty,” the report states, “despite being cautiously optimistic about the near-term prognosis and acknowledging the uncertainties underlying the crisis in Ukraine.”
Based on the continuous revival of tourist arrivals and ongoing investments in the energy industry, CDB anticipates regional growth of 5.7% in 2023.
However, there are some downside risks to this estimate because most advanced economies are on course to have slower growth than 2022, which raises the possibility of a worldwide recession. This slowdown in economic activity might lead to stagflation if it is accompanied with persistent, but lower inflation, Solomon warned.
According to him, the anticipated economic growth should increase tax income for the government and contribute to better budgetary results. Additionally, several BMCs have indicated a desire to step up their consolidation efforts in 2023 in order to resume compliance with the budgetary regulations that were halted during the pandemic time.
Now, the emphasis must be on providing specialized social support to those who are most at risk from the cost-of-living issue. The implementation of fiscal and economic reforms and the advancement of fiscal consolidation, however, can be delayed by a slower-than-anticipated economic recovery.
According to Solomon, rising interest rates on sovereign debt and potential impacts on both foreign direct investment and inward remittance flows will be felt in the area in 2023 as a result of tighter monetary policy in advanced economies in reaction to persistently high inflation.
The ability of the region to obtain sufficient concessional development funding and to continue making progress toward achieving the Sustainable Development Goals may be negatively impacted by the second-round consequences of such policies (SDGs). The region would continue to be under the constant threat of natural hazard events, he said.
According to Solomon, the average primary surplus improved marginally last year, going from a deficit of minus 1.1% of GDP in 2021 to a surplus of 0.2%, while the rate of debt buildup in the region slowed down in 2022.
Solomon noted that supply-chain imbalances, high and persistent food and energy inflation, rising cost of living, and increased concerns over food and energy security are at the forefront of development challenges, adding that this and higher nominal GDP “placed debt ratios on a downward trajectory.”
The CDB official stated that the region’s food security is under jeopardy, especially for the poor, for whom food and fuel make up a sizable portion of their consumption.
Governments, according to him, mitigated this effect by shifting away from significant pandemic-related fiscal stimulants and income support and toward cost-of-living assistance.
“We applaud and support the CARICOM leaders’ initiative to cut the region’s anticipated five billion US dollar food import cost in half by 2025. Additionally, we keep funding numerous BMCs’ climate-resilient agricultural production and marketing systems.
The establishment of a marine cargo service between Guyana, Trinidad and Tobago, Grenada, and Barbados, according to Solomon, is being informed by the consultancy services that CDB is funding. These services will also assist in the development of urgent provisional measures to restore regular air transport services within the Organization of Eastern Caribbean States (OECS).
He claimed that in order to lower inflation, monetary authorities in all significant nations simultaneously scaled back the accommodative monetary policy designed to promote the post-pandemic recovery. As they struggled with the tough policy trade-off of decreasing inflation vs stalling the recovery, Central Banks and monetary authorities in certain BMCs also implemented similar disinflationary measures.
The French-speaking Caribbean Community (CARICOM) nation of Haiti’s citizens, according to Solomon, experienced a “very tough year” in 2022 due to political instability and the ensuing insecurity.
Gang-related violence, severe food and fuel shortages, price increases, and the ongoing detrimental effects of natural disasters and climate change were of special concern. CDB continued its efforts to address Haiti’s development demands while keeping a careful eye on the situation.
Our portfolio of interventions, with a particular emphasis on education, climate resilient agriculture, disaster risk management, and climate resilience, is ongoing through the Haiti Country Office in addition to providing policy advice.
According to the vice president of the CDB, women in the region had a very difficult time finding employment, especially during the coronavirus (COVID-19) pandemic.
When data is available, it reflects rising employment rates for both sexes, reflecting the relaxation of COVID-19 restrictions and the reopening of important economic sectors. It is anticipated that youth unemployment in the area would stay high, underlining the need for communal investment in finding solutions.
According to Solomon, the CDB increased support for enhancing the business environment among member nations with an emphasis on the steps necessary to launch a business.
The goal is to improve these procedures and broaden underprivileged groups’ access to the formal sector, including women, young people, and people with impairments.
