Caribbean Countries Have Several Ways to Enhance Prospects

Caribbean region taking longer to recover from crisis

Reducing high debt levels and improving productivity are region's top priorities

Caribbean conference explores new and better sources of growth

The global crisis had a big impact on economies in the Caribbean because of their strong links to the United States and Europe—and their recovery has been sluggish so far.

While governments responded appropriately to the drop in tourism, trade, remittances and capital flows, they now face economic and social challenges that call for fresh ideas and a renewed policy resolve if the region is to reach a brighter, more sustainable growth path.

To discuss these issues, researchers and policymakers gathered at a conference in Barbados January 27–28 entitled Caribbean Policy Challenges after the Global Crisis. The conference was organized by the University of the West Indies (UWI), the Central Bank of Barbados, and the International Monetary Fund (IMF), and brought together experts from across the Caribbean, Canada, the Seychelles, the United Kingdom, and the United States.

“This conference presented a valuable opportunity to exchange ideas and approaches to common challenges, to search for new solutions, and to develop a shared vision,” noted Dr. DeLisle Worrell, Governor of the Central Bank of Barbados.

Debt and the future of the region

One of the most difficult issues facing the region is the high level of public debt, and its implications for fiscal sustainability and growth. Five of the world’s 13 most indebted nations (as a share of GDP) are now in the Caribbean. Debt has accumulated because of successive years of fiscal deficits and, since the mid 1990s, borrowing by public enterprises and off-balance sheet spending, including financial sector bailouts. With mounting interest bills, the global financial crisis caused serious problems for debt management.

This suggests that fiscal consolidation is critical to ensure macroeconomic stability, and also to ‘crowd in’ the private sector. Conference participants acknowledged that lowering debt would lead to higher growth over time, a finding that is based on considerable research. They accepted also that fiscal adjustment was inevitable since, like households, countries must―over time―live within their means.

The conference looked at the case studies of the Dominican Republic and the Seychelles, where the impact of the crisis was severe, but where governments had responded proactively...