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ECONOMY-CARIBBEAN: “We Are Not in Ordinary Times”

Peter Richards

PROVIDENCIALES, Turks and Caicos Islands, May 29 2009 (IPS) - The news was not entirely unexpected. For Caribbean countries coming to grips with the ongoing global financial and economic meltdown, the diagnosis outlined by Dr. Compton Bourne, president of the region’s main lending institution, though bitter, was accepted as inevitable.

Bourne, who heads the Barbados-based Caribbean Development Bank (CDB), which is holding its annual Board of Governors meeting in this British Overseas Territory, made it clear that “we are not in ordinary times”.

In fact, he warned that negative economic growth is projected this year in seven of the 13 English- and French-speaking Caribbean countries that are members of the bank. In the other six countries, the growth rate, although positive, would be slower this year than in 2008.

Trinidad and Tobago’s Central Bank governor, Ewart Williams, participating in a panel discussion on Thursday titled the “Global Economic Crisis: Implications for Caribbean Sovereigns and the Private Sector”, said he is expecting economic growth to be at least one percent in his country even though the International Monetary Fund (IMF) said it would be below that figure.

It is a disclosure that holds implications for the rest of the region, since oil-rich Trinidad and Tobago has been able to weather the global crisis much better than any of its neighbours, and more so, funnel millions of dollars into a regional fund to assist disadvantaged Caribbean countries.

“We were getting accustomed to oil at a price at well over 100 dollars and suddenly we wake up and it is less than 50 dollars and it has serious implications for us,” he said, adding that consumer confidence which is necessary for rebuilding the economy has declined as “people see the whole world with problems”.

Director of the Economics Department at the CDB, Dr. Denny Lewis-Bynoe, noted that while some countries are in a better position than others to deal with the global meltdown, all are still “challenged by the magnitude of the situation”.

“You don’t know how long it [the crisis] will last…and when you start from conditions that are less than favourable you are putting countries at a disadvantage,” she said, noting that even if the situation were to be solved by “next week, it will take the region a much longer time”.

The U.S.-based international rating agency, Standards & Poor’s, noted that economic activity in the Caribbean during the first half of last year had increased, with some countries taking advantage of the international capital markets. But it added that the picture had changed drastically by year end.

It said the nine rated Caribbean countries ended 2008 with real Gross Domestic Product (GDP) growth at 2.0 percent versus 3.2 percent in 2007.

“In 2008 we revised the outlooks on two Caribbean sovereigns – Jamaica and the Bahamas – to negative from stable, though there were no downgrades or upgrades,” said Olga Kalinina, a director at Standards & Poor’s. “Although no one knows for sure the duration and the depth of the global economic downturn, the picture seems to worsen with every new forecast.”

“Similarly our ratings predictions for 2009 also lack much optimism. Since the beginning of 2009, we downgraded Jamaica, revised the outlook on Barbados to negative from stable and placed the ratings on Trinidad and Tobago on Credit Watch with negative implications,” she said, adding “no Caribbean sovereigns now have ratings with a positive outlook”.

Grenada’s finance minister, Nizam Burke, whose country is now facing an uphill task in meeting a multi-million-dollar debt owed to Taiwan, said that the global crisis had clearly exposed the region’s vulnerability to external shocks.

“Many of our economies are contracting, people are losing their jobs and poverty is on the rise,” he said, noting that plans for the Millennium Development Goals (MDG) by 2015, such as halving poverty, were now in jeopardy.

“In the face of lower tourist arrivals, less remittances and stagnating revenues, our governments are being called upon to expand safety nets to cushion the effects of this crisis on the poor and the most vulnerable,” he said.

“Furthermore, having escaped the first round effects of the financial crisis, we are now witnessing some stress in parts of our insurance industry. In short, this crisis is threatening to reverse our hard-earned gains in human development,” he told the two-day CDB meeting here.

But when he spoke later at the breakfast panel discussion, Burke was confident that the crisis provides an opportunity for Caribbean countries to approach multilateral institutions, such as the International Monetary Fund (IMF), for better lending practices.

“I am seeing a wonderful window of opportunity,” even as he acknowledged that ‘we are not seeing the kind of creativity (from the region) that the situation demands. “I can’t say why,” he added.

Britain has already indicated that it is prepared to assist the Caribbean ride out the crisis as well as to deal with issues relating to climate change, which presents both a financial and social burden for the small coastal countries.

In addition, London is vowing to help the Caribbean move forward in its vision for regional integration and environmentally sustainable growth.

But despite such promises of goodwill, the CDB president has issued a warning to regional governments.

With declining revenue from sectors such as tourism, construction, remittances and a reduction in the availability of trade credit to Caribbean importers, his message was that if those trends persist, even moderately into the medium term, they would reverse the social progress, with a strong impact on the most vulnerable members of Caribbean society.

“It is therefore a matter of major public importance that the slide be halted and economic growth re-started. Determined, national economic leadership by governments is required,” he said.

“The message we want to send from the bank is that the bank is very conscious of the special economic difficulties the countries are facing at this time,” he told IPS.

“We took the decision that on a case by case basis to reduce the counterpart requirements normally imposed on investment loans,” he said, adding that the sub-regional Organisation of Eastern Caribbean States (OECS) would be the main beneficiary of the decision to provide loans to regional countries to meet the premiums for their insurances during the hurricane season that would have normally come from the World Bank.

In addition, the CDB is also examining other options, including expanding its capitalisation base with Bourne, noting “some of our countries are close to the borrowing limits and will not be able to access funds if we do not increase the capitalisation base”.

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