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Press Release: IMF Presents Regional Outlook at a Press Conference at the Eastern Caribbean Central Bank
December 7, 2005
IMF Deputy Managing Director Agustín Carstens held a press conference today in Basseterre, St. Kitts and Nevis, at the Eastern Caribbean Central Bank (ECCB). The event was telecast to all member states of the Eastern Caribbean Currency Union (ECCU). Mr. Carstens discussed the challenges facing the Eastern Caribbean region and Mr. Anoop Singh, Director of the IMF's Western Hemisphere Department, presented the IMF's Regional Outlook for Latin America and the Caribbean. Mr. Carstens made the following statement after the conference:
"It's a pleasure to be here in St. Kitts and Nevis on the second stop of my visit to the ECCU region. The purpose of my visit is to gain a better appreciation of the economic situation so that the IMF can fine-tune its assistance to countries in the region.
"I have had a very productive exchange of views with Governor K. Dwight Venner of the ECCB and his colleagues this morning. There is recognition that the region is at a crossroads. It faces challenges from many sources: high debt levels; vulnerability to global developments such as high oil prices; erosion of trade preferences; and natural disasters. Solutions to these challenges must be home-grown and tailored to the specific circumstances of each country. But I think that there are some common elements that are likely to underlie any successful reform strategy.
"First, it is important for the government to provide macroeconomic and financial stability. The quasi-currency board arrangement, which has provided inflation stability to the region, has to be underpinned by fiscal prudence and sound financial sectors. Second, throughout the region, generating private sector-led growth is critical. Governments should focus on providing the infrastructure and training to empower people to generate incomes in the private sector. Third, the process of regional integration has to move from intentions to implementation. Integration is taking place, but the pace has to be accelerated.
"I am encouraged by signs of progress that countries in the region are tackling some of their difficult problems. Yesterday, during my discussions in Antigua and Barbuda, I was impressed by the extensive reform effort that is underway to deliver sustained growth and better harness the benefits from globalization. Some countries, such as Dominica and Grenada, have made progress in restructuring their public debt. Countries are also facing up the erosion of trade preferences for commodities such as sugar and bananas.
"I am confident that countries in the region will accelerate the pace of reforms, taking advantage of the somewhat favorable global and regional outlook described in the presentation by Mr. Anoop Singh. As he noted, the global economy remains robust, and 2004 saw the strongest performance in three decades, with world output increasing by over 5 percent. In the Latin America and Caribbean (LAC) region, recent growth performance has been good but remains low by international comparison, lagging not only emerging Asia but also all developing countries taken as a group. This points to the significant scope in the region for strong policies to create the necessary environment for private sector-led growth to take off.
"In the Caribbean, economic growth has recovered from the slump after the tourist-dependent economies were hit hard by the impact of September 11, 2001. The growth outlook is better than the LAC regional average, driven in part by the preparations for the 2007 Cricket World Cup.
"There are risks to the near-term growth outlook from several sources. Oil prices, while they have declined recently, are projected to remain relatively high. The risks from this are particularly acute for the Caribbean region and other emerging market countries that are net oil importers, especially in those cases where the pass-through has been delayed by fiscal subsidies.
"Price pressures have remained low in the LAC region, although the world oil price shock has still to be fully reflected in domestic prices in most countries. With the support of the quasi-currency board arrangement, the ECCU has among the lowest inflation rates in the Caribbean, and by international standards also. In the near-term, however, prices in the ECCU region are likely to rise moderately as recent adjustments to domestic petroleum prices feed through the economies and because the sharp increase in construction activity is anticipated to lead to labor and material shortages.
"External current account deficits for the Caribbean countries are projected to worsen in the near term with the rise in oil prices and rising imports related to construction activity. This is particularly evident in the ECCU region in the near-term—fortunately most of it is expected to be financed by foreign direct investment.
"Fiscal discipline remains a critical issue for the entire LAC region, given the generally high debt levels. This is particularly true for the Caribbean, despite recent debt restructurings in several Caribbean countries, including Dominica and Grenada among the ECCU countries.
"Our presentation of this regional outlook here today is part of the IMF's deepening dialogue with the ECCU countries over the last few years. We have strengthened the analytical work that underlies this bilateral and regional surveillance, that is, the regular assessments that we conduct of the economic situation and policies in the ECCU countries. Equally important is our provision of technical assistance, which in many instances is channeled through regional bodies such as the Caribbean Technical Assistance Center (CARTAC). In some cases, we have provided financial support—Dominica has a successful IMF-supported program aimed at reducing poverty and raising growth and Grenada is receiving support under the IMF's emergency assistance policy to help countries cope with the effects of natural disasters.
"Governor Venner mentioned in our meeting this morning that the IMF should focus its attention to helping countries in the region develop an appropriate policy-making framework. I completely agree with this emphasis. My visit will be very useful in helping us to fine-tune the IMF's assistance so that we can better accomplish this task."
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