SOCIAL SECTOR INVESTMENT PROGRAMME
14
SUSTAINING GROWTH, SECURING PROSPERITY
The global economy slowed significantly
in 2012, as a consequence of recession
in Europe caused by financial, fiscal and
competitiveness imbalances, the slowdown
in China and at best moderate growth in
the United States. Growth rates for output
and global trade fell and capital flows to
developing countries declined and became
more volatile.
2.1 REGIONAL ECONOMIC
DEVELOPMENT
This downturn was transmitted to LatinAmerica
and the Caribbean (LAC) mainly through its
impact on trade. With the European Union in
recession and China’s economy slowing in 2012,
the region’s exports to the European Union
contracted by 4.9%, and to China, by 1.7%. By
contrast, exports to the United States increased
by 4.8% as a result of modest growth in that
economy, whilst intra-regional exports climbed
by 1.4%
1
.
Currently, the Caribbean can be described
as a financially indebted region where weak
competitiveness continues to constrain growth.
Thekeychallenges that put astrainonCaribbean
economies are high public debt, external
imbalances, and financial sector vulnerabilities.
Growth in the tourism-dependent economies
averaged under 0.5% in 2012. Tourist arrivals
slowed in the latter part of 2012 reflecting
1 Preliminary Overview of Economies of Latin America and the
Caribbean 2012
/
Preliminary_Overview2012final.pdf
subdued growth in the advanced economies.
In contrast, growth was more robust for
commodity exporters such as Belize, Guyana,
Suriname, and Trinidad and Tobago, reaching an
average of about 3.5% in 2012. In Haiti, growth
slowed to 2.75% in 2012, mainly on account of
delays in the implementation of reconstruction
related projects.
2
Weak domestic demand and large output
gaps helped keep inflation low in much of the
region. The external current account deficit in
the tourism-dependent economies remained
high (more than 16% of GDP on average),
largely reflecting the region’s high dependency
on energy imports. Fiscal consolidation
continued, although in many cases it fell short
of initial plans. Primary fiscal balances improved
slightly in most tourism dependent economies
(deteriorating in Barbados and St. Lucia), and
public debt levels have begun to stabilise, albeit
at high levels.Fiscal effortswereaccompaniedby
debt restructuring in a few countries, including
Jamaica, St. Kitts and Nevis, and more recently
Grenada. The key challenge for these countries
remains the reduction of high public debt. As
such, fiscal retrenchment has been identified as
a critical measure to address growing external
imbalances
3
.
In
the
Caribbean
commodity-exporting
economies, growth is expected to be about 3.5%
to 4% during fiscal year 2014. The key near-
term challenge is to contain the rapid growth in
2 IMF Regional Economic Outlook. West Hemisphere-Time to
Rebuild Policy Space, May 2013.
3 Preliminary Overview of Economies of Latin America and
the Caribbean 2012
/
xml/3/48593/Preliminary_Overview2012final.pdf
CHAPTER 2:
THE CARIBBEAN SOCIAL SITUATION
