Press Release: Caribbean Conference Discusses Growth Challenges and Policy Perspectives for Region
January 28, 2011Press Release No. 11/21
January 28, 2011
Researchers, academics, and government officials discussed the economic and social challenges facing the Caribbean at a January 27–28 conference in Barbados entitled Caribbean Policy Challenges after the Global Crisis and organized by the University of the West Indies (UWI), the Central Bank of Barbados, and the International Monetary Fund (IMF).
Participants found that economic growth in the region has lagged other parts of the hemisphere largely because of weak productivity growth, in contrast to relatively high levels of investment, and weak integration with the so-called new global “growth poles”, such as Brazil and China., and concluded that diversification of economic partners and export markets, which some countries are already pursuing, should become a deliberate strategy going forward.
Conference participants from all over the Caribbean and from Canada , the Seychelles, the U.K., and the U.S. examined key issues facing policymakers today: low rates of productivity and economic growth, the impact of high public debt on growth, fiscal sustainability, the role of tourism and offshore financial centers, and ways to protect social spending during times of stress.
“This conference presents 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, adding, “It also provides an important opportunity for networking and building relationship.”
One of the most difficult issues facing the region is high public debt levels and the implications for fiscal sustainability and growth. Some of the countries in the Caribbean are among the most highly indebted in the world. In addition to running fiscal deficits, much of the debt increased since the mid 1990s as a result of off-balance sheet spending, including financial sector bailouts, and borrowing by public enterprises. With mounting interest bills, the global crisis caused serious problems for debt management.
Based on the research presented, conference participants acknowledged that lowering debt would lead to higher growth over time, and debated about how best to get there. They accepted that fiscal adjustment was inevitable and governments have to live within their means and rein in public spending. While there was a consensus on the importance of lowering debt, participants discussed innovative ideas to address the debt overhang, including the experience of the debt exchange by Jamaica and debt restructuring by Antigua.
The discussions also focused on how tourism has contributed positively to growth, but could play a stronger role if steps are taken to increase the productivity and competitiveness of the sector. Also, while evidence suggests that the Caribbean has benefited from Offshore Financial Centers both in terms of revenue and growth, increasing compliance costs associated with a number of global initiatives call for a more proactive approach by the authorities to maximize the benefits.
Concluding the conference, Rodrigo Valdes, Senior Advisor in the IMF’s Western Hemisphere Department, said “This is the beginning of a close dialogue about policies that will promote new sources of growth, greater economic integration, diversification of sectors and markets, and stronger private sector engagement.”