The International Monetary Fund (IMF) says Caribbean countries will experience economic growth of just over one per cent this year, even as Latin America and the Caribbean will record half a percent economic growth in 2013. The IMF said that the growth will be supported by stronger external demand, favourable financing conditions and the effects of earlier policy easing in some countries.
In its Regional Economic Outlook for the Western Hemisphere, the IMF said that the Latin America and the Caribbean countries would experience growth from three per cent in 2012 to 3.5 per cent this year.
But the Washington-based financial institution said that in much of the Caribbean, high debt and weak competitiveness will continue to constrain growth and that these economies are projected to grow by about 1.25 per cent in 2013 from 0.5 per cent percent in 2012, as external demand strengthens gradually. The key challenge for these countries remain broadly unchanged, reducing high public debt, containing external imbalances, and reducing financial sector vulnerabilities, the IMF said.
It said that the external risks to the near-term outlook have receded and that policy actions in the Euro area and the United States have removed immediate threats to global growth and financial stability.
But it warned also that failure to replace the automatic fiscal spending cuts in the United States with more backloaded measures before the start of the next fiscal year in October would affect growth in late 2013 and beyond.
The new report reaffirmed an earlier message that countries in the region should take advantage of the current favourable economic conditions to build a strong foundation for sustained growth in the future. Policy priorities include building stronger fiscal buffers, improving policy frameworks, and pressing ahead with structural reforms to increase productivity and potential growth.
Growth in the financially-integrated economies in 2013 is projected at about 4.25 per cent.
For these countries, the IMF pointed out that the key policy priorities are to strengthen public finances and protect financial sector stability. Stronger public balance sheets would help ease pressure on capacity constraints and arrest the widening of current account deficits.
Growth in the other commodity exporters is expected to increase to 4.6 percent in 2013, from 3.3 per cent in 2012. However, in the large energy exporters growth is projected to moderate. The IMF said these countries would benefit from saving a much larger share of their commodity revenues.
Average growth in Central America is expected to remain close to potential in 2013. Looking ahead, the report said that gradual tightening of fiscal policy in these countries would be necessary to reduce fiscal and external imbalances and ensure debt sustainability.