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The Caribbean Development Bank (CDB) is projecting gross domestic product (GDP) growth of 9.1% across its 19 Borrowing Member Countries (BMCs) in 2022, accelerating the region’s economic recovery which started in 2021.
The favourable outlook is anchored by an expected surge in the GDP of commodity-exporting economies by an estimated 17.5% on account of strong growth in Guyana (47.5%), emanating from increased oil and gas production, and a resurgence in energy production in Trinidad and Tobago as supply-side constraints are alleviated.
Higher international prices for crude oil should translate into revenue windfall. Service-exporting BMCs are forecasted to gain momentum, growing at an average rate of 4.8%, reflecting the continued inflow of international visitors. It is anticipated that this rebound is likely to strengthen during 2022 as restrictions ease, on account of strengthened protective health measures. However, the return of international passenger arrivals will depend on the acceleration of vaccination rates; effective management of the pandemic without resorting to full and lengthy lockdowns; and continued confidence in protocols established for safe travel to the region.
“A key lesson from the impact of the pandemic is that those countries entering the pandemic on a strong macro-fiscal footing fared better in weathering the headwinds. As such, countries are redoubling efforts to achieve debt sustainability despite extant challenges. Many countries are implementing programmes to achieve sustainability with support from the international financial institution community, including from CDB. Others are doing so outside of supported programmes but have established explicit fiscal anchors to function as platforms for macroeconomic policy frameworks.” said CDB Director of Economics Ian Durant at the Bank’s Annual News Conference held virtually last week.
The growth predicted for 2022, is also underpinned by expectations of accelerated implementation of several large infrastructure projects across the region. “Despite being a challenging year for the region, 2021 witnessed the continuation of a nascent regional recovery that began in the latter part of 2020,” the CDB Director of Economics highlighted. “The combination of easing of border controls and internal lockdown measures and the continued implementation of fiscal stimulus programmes in some BMCs helped regional economies in recovering some of the lost ground in economic activity.”
In 2021, service-exporting economies expanded by 3.2%, which was due to a rebound in two sectors, Hotels and Restaurants, and Wholesale and Retail Trade, buoyed by an almost 10% increase in tourist arrivals between January and September, compared with the same period in 2020. Belize recorded growth of 10.9% while Saint Lucia’s economy grew by 6.8%. The economies of Grenada, and Antigua and Barbuda advanced by 4.8% and 4.7% respectively while the Bahamas gained 3.1% and Barbados grew by 1.4%.
Among commodity-exporting countries, the average growth rate of 2.7% was driven by Guyana (19.9%), reflecting an increase in crude oil production, along with growth in the non-oil segment. Conversely, GDP in Trinidad and Tobago contracted by 2.9%, due to lower natural gas production with effects on downstream industries, along with mandated closures in the service sector. Similarly, in Suriname GDP declined by 3.5%, as the ongoing fiscal, economic and health crisis continued to weigh heavily on economic growth.
After a sharp rise in regional debt-to-GDP in 2020 by 17.7 percentage points, largely because of the unparalleled contraction in regional GDP and to a lesser extent increased borrowing to respond to the COVID-19 crisis, average debt-to-GDP fell by 2.0 percentage points to 80.5% in 2021.
Mr. Durant explained that the impact of the pandemic exposed the structural weaknesses that have caused the region’s acute vulnerability to global economic shocks. Consequently, while the pandemic had an impact globally, there is no doubt that the high level of export concentration, which is a direct result of the structural weaknesses in the region, amplified the impact of the pandemic across the Caribbean.
Stressing that recovery efforts need to be consistent with the longer-term repositioning of the region’s economies, the CDB Director of Economics said this was necessary to reduce these vulnerabilities. Therefore, the region needs to become more resilient in all its development dimensions – social, economic, environmental, and institutional.