Cutbacks in government spending and the “larger than anticipated impact of earlier policy tightening” are causing economic growth in the Caribbean to slow, the International Monetary Fund announced Friday. In their biannual Regional Economic Outlook, the IMF said that gross domestic product growth in the Latin American and Caribbean region slowed to about 3 percent for the first six months of 2012 compared to 4.5 percent growth that the region experienced during the same period in 2011.
However, the IMF’s regional figures include fast growing South American countries such as Brazil and Chile. The economies of the tourism dependent countries of the Caribbean actually shrank by .6 percent over the same period last year according to the IMF. The fund defines the Caribbean region as The Bahamas, Barbados, Jamaica and six members of the Organisation of Eastern Caribbean States. It does not include the Virgin Islands. The report blames the Caribbean’s slow growth to “a sea of elevated debt, weak external demand, and unfavorable terms of trade.”
“Tourist arrivals are somewhat higher than in 2011, but the weak recovery in advanced economies, and in some cases limited price flexibility in tourism activities, are keeping growth subdued,” the report stated. “However, prospects for commodity exporters are somewhat better, with output projected to grow by an average of about 2.75 percent.”
Difficulties with the region’s financial sector, including banks with a high level of “non-performing” loans aren’t helping either, according to the IMF.
“Greater resolve is required in reducing public debt and in adopting structural reforms to boost growth and competitiveness,” the regional outlook stated. “Steps are also needed to reduce financial fragilities, including improving supervision and regulation and completing the resolution of troubled institutions.”
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