The troubling world economic environment has impacted on Caribbean economies. Countries like Spain where many families can barely afford to eat are even worse off than the region. Despite these conditions, some Caribbean economies are expected to grow in 2013, says world-renowned economist Prof Compton Bourne.
"So we have the world environment which, in the economic sense, troubling. Caricom countries, with the exception of Haiti, Guyana and Suriname, entered into economic recession through the global recession. But by 2011, most of them had emerged from recession," he said.
Countries like Barbados barely grew in 2011.
"Marginally, in the case of Barbados and St Lucia, the growth domestic product (GDP) growth was 0.5 per cent and 0.6 per cent, respectively. The economy of Antigua and Barbuda declined by a little less than half a percentage point and, in St Kitts, by two per cent, St Vincent and the Grenadines declined by 0.4 per cent and T&T declined by 1.6 per cent."
Weak economic growth is projected next year, with countries like Haiti expected to have stronger growth.
"Haiti, which was devastated by an earthquake, but experienced a 5.4 per cent increase in GDP in 2010 and 5.2 per cent in 2011. The projections for 2012 are for slow or moderate economic growth in all Caricom countries.
"Barbados and Dominica have projected growth rates of less than two per cent. Antigua and Barbuda, Bahamas, Belize, St Lucia, St Vincent and the Grenadines and T&T have projected growth rates of two per cent to a 2.5 percent range. While Guyana, Haiti and Suriname are projected to be the strong performers, with GDP growth averaging 7.3 per cent in Haiti, five per cent in Guyana," he said.
Although the economies remain in a difficult situation, Bourne spoke optimistically for the global economy in 2013.
"The outlook for this year 2012 and next year 2013 is positive, but is conditioned by serious downside stemming from the economic decline in Spain, which is now an impoverished country. I saw on the news yesterday a family of four sharing one boiled egg for breakfast, which tells you what has happened to the Spanish population and economy," he said.
Bourne highlighted some areas in which the Eurozone crisis has impacted on Caricom's fortunes.
"One is the persistence of the high rate of unemployment in the Euro area and US.
"Secondly, the re-balancing of household wealth through reduction of household growth debt.
"Third, projected high levels of government indebtedness, it is 85 per cent of GDP in the United Kingdom. So when we talk about the Caribbean countries as being one of the world's most heavily indebted, we should not lose sight of the fact that there are some big countries that are also in the same situation.
"Fourthly, there is the apprehension of financial market investors in the world capital markets and the credit market downgrade. I think 20 of the of the world's largest banks and firms were downgraded a few months ago," he said.
He was speaking last Thursday at the Conference of the Economy (COTE) hosted by the Economics Department of the University of the West Indies (UWI), St Augustine.
COTE 2012 paid tribute to Bourne who is a former St Augustine Campus Principal and previous head of the Department of Economics.
High regional unemployment
He said the challenge is to increase economic growth rate, but this is difficult with high unemployment rates.
"The goal of revitalising Caribbean economic growth with combined developmental policies and economic diversification will include emphasis on substantially increased efficiency in the public sector. We have throughout the Caribbean quite an inefficient public sector which creates a major drag on development," he said.
He said achieving this requires badly-needed public sector reforms throughout the region.
"There must also be reforms of public expenditure and tax policies to optimise economic stimulation and to improve the provision of public services and social effects. To do these things places burden on financing where they are already difficult. To finance economic growth, Caribbean countries must raise their growth investment rates which are lower now than they were in 2007. High levels of government indebtedness constrain the abilities of governments to finance," he said.
Bourne believes fewer tourists coming to the region has impacted the region the most.
"The main transmitters of the global crisis to Caricom economies have been the depression of tourism aided by expenditures, contraction for international business services, which are important for Barbados and the Bahamas. International commodity prices fell, with the exception of gold, which rose, and the decrease of direct foreign investment to the region in the last several years," he said.
The result: higher unemployment.
"The weak economic performance of Caricom countries during the period of economic crisis is reflected in an upward trend in unemployment rates. This features the rise in unemployment rate and is particularly problematic, given the limited fiscal space enjoyed by Caricom governments and limited employment opportunities through public works programmes.
"The generation of sustainable employment will, of necessity, then depend on the recovery of the main economic sectors, like energy, tourism, agriculture and construction."
Eurozone
Bourne painted a grim image of the Eurozone.
"The crisis, which began in 2008, became widespread in 2009. Global GDP decreased by 1.2 per cent. The UK and US had negative growth of 3.5 per cent and 4.4 per cent, respectively, while Canada, Germany and France contracted by 2.8 per cent, 5.1 per cent, and 3 per cent, respectively.
"Among the BRICS, only China with GDP growth of 3.2 per cent, India 5.8 per cent, did not decline. This global recession was paralleled by the 10.9 per cent contraction in the volume of world trade and decreases in international commodity prices.
"Paralleled by increasing rates of high unemployment it affected the major OECD economies with over six per cent in the UK and over five per cent in the US and 8.3 per cent in Canada," he said.
Bourne said the political situation in some Eurozone countries is blocking economic reforms.
"Economic decline in Spain, Portugal and Greece, Italy and Ireland. Downside risk associated as well with the acute political difficulties confronting sustainable implementation of economic stabilisation programmes in Europe, of the new episode global financial market collapse connected to the possibility of the default of European sovereign debt, and the tenuous balance between fiscal consolidation and economic recovery in the UK.
