Feb. 9, IWN — The Caribbean Development Bank on Friday projected “a modest/moderate” 1-2 per cent growth in most of the Organisation of Eastern Caribbean States countries in 2013.
The Barbados-based institution said the projected growth reflects “on-going efforts at fiscal consolidation” and that the outlook for the Caribbean region was “positive but remains subdued”.
The CDB, in a release highlighting its economic background and prospects for 2013, identified a number of extra-regional factors that contribute to economic realities in the Caribbean.
But it said the Caribbean must pay close attention to avoiding its own “fiscal cliff” through “a gradual but deliberate reduction of its mounting debt stock”.
“In at least seven BMCs (Borrowing Member Countries), debt levels have become unsustainable,” the CDB said.
It said anchoring investor confidence at home and abroad will require governments to take “corrective policy action”.
“The fiscal policy agenda must include measures that tackle improvements in tax yields by reassessing the range of exemptions and concessions being offered, and by improving compliance and collection of arrears.
“Improvements in expenditure management systems should increase the focus to projects and programmes with high development impact and cost minimisation.”
These policy actions are underway, but need to be accelerated, especially in countries where the resolution of on-going financial sector issues could require outlays from government, the CDB said.
It further said the region must also seek to “build economic resilience by intensifying its economic diversification efforts.”
It noted that some countries are exploring geothermal potential but said these efforts must be deepened and broadened.
“Countries are also exploring opportunities for within-sector diversification e.g. health; culture; and nature-based tourism, to capitalise on already established comparative advantages within sectors.”
The region’s macroeconomic outlook is “conditioned by a number of factors, the CDB said.
“On the upside, global recovery is forecast to continue with growth inching up to 3.5 per cent in 2013 supported by a modest pickup in some emerging markets and developing economies and continued, albeit moderate, recovery in the US and the UK.”
The CDB said policy actions taken by the United States in late 2012 to avert the “fiscal-cliff” were instrumental in rallying the market and dispelling fears of an imperilled global recovery.
“Indeed, the speed at which a solution is found to entrench fiscal and debt sustainability in the US (including efforts to raise the debt ceiling) will be critical to containing market uncertainties.
“In the Eurozone the articulation of the European Stability Mechanism and sustained efforts to strengthen the banking system and repair public sector balance sheets have reduced risks to stability and improved financial conditions.
“However, the possibility of policy reversal or slow implementation of reforms could undermine growth,” the CDC said in the release.