The United Nations Economic Commission for Latin America and the Caribbean (Eclac) says the Caricom region (excluding Haiti) should experience a slower rate decline in economic activity in 2010. It expects a 0.5 per cent drop which is an improvement on the combined 2.3 per cent drop last year. Eclac expects modest expansion of 2.2 per cent in 2011; which means several nations will still struggle to emerge from the global downturn. "Next year should result in a return for growth, depending on the country," Gabriel Torres, a senior analyst at Moody's credit rating agency. "But it's not going to be very high growth even in the best of circumstances," he said. "Many of them have high debt burdens, so low growth with a high debt burden are not a good combination," Mr Torres said.
Signs emerging
Most of Caricom will be watching for signs that an economic recovery gains momentum in the United States and for an ease to economic problems in Britain and other European nations. "Caribbean economic performances appeared to be tied to the slow growth of their trading partners emanating from the advanced industrial countries," said the Caribbean Centre for Money and Finance. Among the economies expecting an upturn next year is the Bahamas. "It is now widely accepted that signs of economic recovery are beginning to emerge," Bahamas Prime Minister Hubert Ingraham said in a recent speech. The Bahamas and other island nations dependent on tourism and financial services have been among the hardest hit by the downturn.
The pace of growth in Caricom was highest in Guyana and Suriname. Eclac said economic activity in these countries was driven by higher rice and gold production in Guyana and improving commodity prices in Suriname. Jamaica and Antigua and Barbuda entered into formal arrangements with the International Monetary Fund (IMF) but fears that others would join the queue did not materialise. Some tried to shore up their finances by raising taxes and cutting expenditure like Barbados and St Kitts and Nevis.
High liquidity
Lack of growth doesn't mean lack of funds for investment. The Caribbean Centre for Finance lamented that Caribbean economies are mired in high liquidity that refuses to be transformed into domestic lending. It cited T&T as the most extreme case, where total deposits grew 22.7 per cent year on year to June 2010; though loans outstanding grew by only 2.3 per cent. The high public debt, narrow revenue streams and a high liquidity-low credit ratio represent a worrying trend, according to Eclac. It said: "These challenges threaten the attainment of the (UN's) Millenium Development goals, in particular the eradication of extreme poverty, achievement of universal primary education and improving maternal health." The sluggishness among Caricom nations is in contrast to the Dominican Republic, the Caribbean's largest and most diversified economy. The Spanish-speaking nation is expected to grow by an impressive 7.0 per cent this year, thanks to telecommunications and construction.
BBC Caribbean