Press Release: IMF Conducts Press Briefing in Jamaica on the Regional Economic Outlook for Latin America and Caribbean
December 14, 2005
Ms. Ratna Sahay, Assistant Director of the Western Hemisphere Department at the International Monetary Fund (IMF), released the following statement today in Kingston after her presentation of the IMF's Regional Outlook for Latin America and the Caribbean:
"Today's presentation is part of a series of regional outlook presentations by Fund staff being held across the Latin America and Caribbean (LAC) region. This presentation is part of the IMF's deepening dialogue with the Caribbean countries over the last few years.
"The global outlook for growth and inflation is broadly favorable. The global economy remains robust, and 2004 saw the strongest performance in three decades, with world output increasing by over 5 percent. Global inflation has picked up slightly, but remains contained, despite higher oil prices.
"In the Caribbean, economic growth has been recovering from the slump after the tourist-dependent economies were hit hard by the impact of September 11, 2001. The short-term growth outlook in the Caribbean is driven in part by construction activity ahead of the 2007 Cricket World Cup. The authorities in many countries are undertaking reforms to contain external deficits and entrench growth over the medium term. Price pressures have remained low, although a few countries are approaching or are in the double digit inflation range. Also, the world oil price shock has still to be fully reflected in domestic prices in most countries.
"Fiscal discipline remains a particularly critical issue for the Caribbean, despite recent debt restructurings in several countries, including Dominica and Grenada. Though fiscal positions in the region have strengthened considerably since 2002, average debt levels remain high and under pressure from infrastructure demand and from high petroleum prices.
"There are three principal risks to the near-term growth outlook. First, unexpected changes in the global external environment pose risks to the region, given the region's strong trade and tourism links and dependence on foreign capital. Second, risks arise from weaker terms of trade in the form of continued high oil prices and the upcoming erosion of trade preferences. Finally, political cycles also pose risks to the economic outlook—over the next 18 months, a number of Caribbean countries are slated to have elections.
"Regarding Jamaica, the economy has been buffeted by external shocks this year-a sharp rise in oil prices and significant damage from a number of hurricanes. Looking forward, barring further adverse shocks, economic growth should pick up and inflation decline to single digits. Jamaica's growth potential can be substantially raised over the medium term by increasing the efficiency of investment and improving the investment climate for the private sector. It is important for the government to continue on the path of fiscal consolidation. The authorities are striving to achieve their fiscal targets, though some limited deviations from the objectives can be expected in the face of the large shocks experienced this year. The government's debt reduction strategy is being supported by intensified surveillance by the IMF."