Caribbean Must Shift Growth Strategy, according to World Bank Report

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By the Caribbean Journal staff

The Caribbean region, like the rest of the developing world, must refocus its strategies from crisis-fighting to structural reforms aimed at growth, according to this month’s Global Economic Prospects report from the World Bank.

“Developing countries have been resilient despite tensions in high-income countries,” said Hans Timmer, director of Development Prospects at the World Bank, in a statement. “Monetary policy has responded, but fiscal and exchange rate policy may need to play a bigger role to keep inflation in check.”

The Caribbean grew at only a 3.8 percent clip last year, although that was a marked improvement from 2009’s 0.5 percent increase. According to the report, economic activity in the region should improve to 4.1 percent this year, due in large part to growth in the Dominican Republic and reconstruction in Haiti.

The rest of the region, however, would not do as well. The report cautioned that Jamaica would be one of the weakest performers in the region, however, due to “structural weaknesses and over-dependence on the United States.”

It also predicted that growth in these countries would be held back by a “moderate expansion in the tourism sector and remittances.”

Sustained oil price hikes could also cost the region between 0.3 and 0.4 percentage points of growth in the next two years. Several Caribbean nations, including Jamaica, St. Vincent, Dominica and St. Lucia, will see the largest terms of trade losses, in excess of 3.5 percent of GDP, due largely to increased oil prices.

See the chart below for the World Bank’s growth estimates for the next two years.