{
  "title": "Global and Regional Challenges to Caribbean Economic Development - 2016 High Level Caribbean Forum on Shifting Tides: Challenges and Opportunities",
  "publication": "IMF News, November 2, 2016",
  "sourceUrl": "https://www.imf.org/en/news/articles/2016/11/02/sp110216-global-and-regional-challenges-to-caribbean-economic-development",
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  "summary": "Tao Zhang, IMF Deputy Managing Director",
  "publishDate": "2016-11-02",
  "sections": [
    {
      "heading": "Introduction",
      "content": "- Speaker: Tao Zhang, IMF Deputy Managing Director.\n- Event: 2016 High Level Caribbean Forum.\n- Date: November 2, 2016.\n- Context and acknowledgments:\n  - Expressed condolences to victims of Hurricane Matthew, particularly in Haiti.\n  - Thanked Prime Minister Rowley and the government of Trinidad and Tobago for hospitality and co-hosting.\n  - Noted visit to the University of the West Indies and examples of local innovation (steel pans, cocoa production).\n  - Forum theme: \"Shifting Tides\" — focus on challenges and opportunities from changing global and regional trends."
    },
    {
      "heading": "Global Challenges",
      "content": "- Global growth and outlook:\n  - \"2016 is proving to be another year of lackluster growth.\"\n  - World Economic Outlook (released early October) projection: global growth at 3.1 percent this year, with risks weighted to the downside.\n- Three key global trends influencing near-term outlook:\n  - Commodity prices:\n    - Trend decline since 2011 in commodity prices appears to have bottomed out.\n    - Expectation: prices to remain at low levels and volatile going forward.\n  - Advanced-economy recoveries and uncertainty:\n    - U.S. recovery has been softer than previously expected—although there has been a further uptick in activity, more recently.\n    - Uncertainty has risen in Europe as countries manage economic recovery and the process of Brexit.\n  - Financial conditions and regulation:\n    - Global financial conditions have eased and global financial regulations tightened.\n    - Interest rates in advanced economies are expected to remain low.\n    - Efforts to strengthen AML/CFT (anti-money laundering and countering financing of terrorism) have intensified.\n- Implications for Caribbean economies:\n  - Low and volatile commodity prices:\n    - Negative impact on oil exporters like Suriname and Trinidad and Tobago; Trinidad’s economy under pressure despite some savings during the good times.\n    - Positive impact for oil-importing countries: improved external positions (example: Jamaica eliminated much of its double-digit current account deficit in just a couple of years; Guyana experiencing its first external surplus in decades).\n    - Continued need to improve efficiency of domestic power utilities, reduce reliance on government subsidies, and expand renewable energy.\n  - Slower recovery in U.S. and Europe:\n    - Pickup in tourist arrivals in the last two years could reverse in tourism-dependent Caribbean economies.\n    - Projections: Euro Area to grow by only 1.7 percent this year and 1.5 percent in 2017; United Kingdom projected to grow by a modest 1 percent next year. Significant risks around these projections due to unclear impact of Brexit.\n    - Noted recent data showing higher-than-expected third quarter growth rates in both the U.K. and the U.S. could provide room for optimism.\n  - Financial and monetary implications:\n    - Slower global growth delayed normalization of monetary policy in advanced economies, enabling continued easy financial conditions for the rest of the world.\n    - Low world interest rates help reduce debt servicing costs for Caribbean countries with high debt.\n    - Tighter global regulations create challenges: withdrawal of correspondent banking relationships (CBRs) by international banks is affecting Caribbean banks and clients.\n      - Consequences: loss of some or all correspondent banking relationships across the region; international banks stopping services and dropping clients deemed “high risk”; challenges for participation in global payments system; negative effects on remittance-dependent households.\n      - Example: In Belize, the problem has reached systemic proportions with bank assets equivalent to almost half of GDP being affected.\n    - Identified causes: gaps in regulatory and supervisory frameworks in some affected countries.\n    - IMF response: providing technical assistance to strengthen frameworks; advocating dialogue among countries, regulators, and banks; promoting increased information exchange, capacity building, and sharing best practices."
    },
    {
      "heading": "Regional Challenges",
      "content": "- Natural disasters and climate change:\n  - Hurricane Matthew underscored importance of preparation and mitigation.\n  - Climate change will make catastrophic events more frequent and intense; recurrent droughts and rising sea levels will affect agriculture, fisheries, coastlines, and biodiversity.\n  - IMF studies propose a policy framework for enhancing resilience in small states, emphasizing:\n    - Greater focus on risk reduction and preparedness (in addition to response and reconstruction).\n    - Exploring avenues to finance prevention policies, including possibly through fiscal buffers, contingent financing plans, and risk transfer arrangements.\n- Banking sector vulnerabilities:\n  - Financial sectors in some Caribbean countries suffer from poor asset quality, low profitability, and insufficient capital.\n  - ECCU countries have taken steps to enhance banking sector resilience: banking legislation and resolution of three insolvent banks.\n  - Further reforms required: strengthening supervision and increasing capital of indigenous banks.\n- Impact of U.S.-Cuba rapprochement:\n  - Concern that U.S. tourism could flow to Cuba at the expense of other Caribbean destinations.\n  - Noted regional resilience and precedent (Dominican Republic emergence as a tourist destination).\n  - Forum to discuss converting this challenge into an opportunity by preparing to improve destinations and strengthen competitiveness."
    },
    {
      "heading": "Policy Responses",
      "content": "- Ongoing and needed reforms:\n  - Competitiveness:\n    - Persisting challenges from 2012 Forum: enhancing labor productivity and reducing energy costs remain relevant.\n    - Many countries are making renewable energy and reduced energy costs part of growth strategies; implementing potentially far-reaching energy reforms.\n    - Continued need to boost energy efficiency and improve labor productivity to foster competition and growth.\n  - Fiscal adjustment and debt management:\n    - Fiscal adjustment can be difficult to sustain amid weak growth; this remains the case.\n    - Success stories: Jamaica, Grenada, and St. Kitts and Nevis have reduced fiscal and external vulnerabilities in recent years; Trinidad and Tobago is pursuing similar goals.\n    - Current global financial environment with low interest rates provides a window of opportunity to:\n      - (1) pursue adjustment,\n      - (2) undertake liability management to lower financing costs,\n      - (3) reduce debts to safer levels.\n    - Emphasis: fiscal and macroeconomic stability are necessary but not sufficient; country-specific structural reforms are needed to secure growth dividends.\n  - Structural reforms and sustained effort:\n    - Progress on growth, diversification, competitiveness, energy efficiency, financial sector vulnerabilities, and fiscal adjustment has been incremental—reflecting complexity and need for sustained policy effort.\n  - Additional risks to monitor:\n    - Brexit-related risks and further spread of the Zika virus could affect tourism.\n    - Developments in Venezuela could carry important effects for members of the PetroCaribe agreement.\n- IMF support:\n  - Committed to supporting policy reforms, reconstruction efforts, policy advice, technical assistance, training, and financing.\n  - Example: Jamaica announced a staff-level agreement for a successor arrangement to its Fund-supported program focusing on growth and job creation by tackling structural bottlenecks including public safety.\n  - Highlighted Jamaica’s Economic Growth Council as an example of private-public cooperation. Similar lessons cited from Fund-supported programs in Grenada and St. Kitts and Nevis."
    },
    {
      "heading": "Conclusion",
      "content": "- IMF commitment:\n  - Reiterated deep commitment to work with Caribbean countries; support policy reforms and reconstruction.\n  - Affirmed intention to build on prior Fund engagement in the region and to strengthen engagement under the Deputy Managing Director’s term.\n- Outlook:\n  - Pledged continued cooperation to address new challenges and find solutions through policy advice, technical assistance, training, and financing.\n  - Looked forward to productive discussions at the Forum and future visits.\n\nTao Zhang, IMF Deputy Managing Director — Speech, November 2, 2016\n\n---\n\n\n References\n\n- Tao Zhang\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2016/11/02/sp110216-global-and-regional-challenges-to-caribbean-economic-development"
    }
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    "Published: November 2, 2016",
    "Speaker: Tao Zhang, IMF Deputy Managing Director.",
    "Event: 2016 High Level Caribbean Forum.",
    "Date: November 2, 2016.",
    "Context and acknowledgments:",
    "Global growth and outlook:",
    "Three key global trends influencing near-term outlook:",
    "Implications for Caribbean economies:",
    "Natural disasters and climate change:",
    "Banking sector vulnerabilities:",
    "Impact of U.S.-Cuba rapprochement:",
    "Ongoing and needed reforms:",
    "IMF support:",
    "IMF commitment:",
    "Outlook:",
    "[Tao Zhang](https://www.imf.org/en/About/senior-officials/Bios/tao-zhang)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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