... Regional performance caught in vicious cycle
CARIBBEAN DEVELOPMENT Bank (CDB) President Dr Warren Smith called for a reversal of the pattern of decline in the region’s economies, saying that the borrowing member countries needed to be placed firmly on a path of sustained and inclusive income growth with discernible improvements in living standards.
Smith pointed to what he said were “the two most pressing policy imperatives” for the region: offering services that promote efficiency and cross-competitiveness while fostering inclusive growth and protecting vulnerable groups in society; and government activities financed by revenue systems that meet the sufficiency criterion while promoting equity and economic efficiency.
“Regional fiscal performance is, however, caught in a vicious cycle. Because economic growth rates are so low, many governments are unable to generate the primary balances needed to correct adverse debt dynamics, so public debt remains unsustainably high.
“Emergency revenue measures implemented to stem fiscal deterioration following the global recession have had a perverse impact on competitiveness, further constraining growth,” he added.
The CDB president said that unlike more diversified small states such as Mauritius and Singapore, which have weathered recent global shocks well, Caribbean economies continue to exhibit the volatility that has kept average growth rates low, unemployment and poverty high, and living standards stagnant.
Regional fiscal performance is, however, caught in a vicious cycle. Because economic growth rates are so low, many governments are unable to generate the primary balances needed to correct adverse debt dynamics, so public debt remains unsustainably high.
REGION NEEDS AN ACTION PLAN
Ram, meanwhile, believes that the Caribbean needs an action plan that better enables it to participate in global supply chains and targeted social-development assistance.
“But policymakers must be prepared to set the right environment to tackle the obstacles to growth. That is to say, the doing business environment, including access to financing for micro, small, and medium-sized enterprises, and labour market reforms, all of which could increase productivity and enhance competitiveness.
“In this endeavour, it would be necessary to reform governance structures and institutions to support the new paradigm. Governments will have to be willing to stabilise their economies through fiscal and debt consolidation and to develop strong, targeted social-development programmes,” he said.