Caribbean nations are likely to feel the impact of the global financial crisis through a drop in remittances from overseas workers and tourism revenues, the head of the International Monetary Fund said on Wednesday.

"The Caribbean region will inevitably be impacted by the challenges confronting the global economy, particularly given the region's close ties to the US economy," Dominique Strauss-Kahn, the IMF's managing director, said in a prepared speech for delivery in the Jamaican capital.

While Jamaica has a small island economy, it has been directly hit by the global liquidity squeeze that has slowed private capital flows and made it difficult for governments to raise financing. Its currency and foreign exchange reserves have also come under pressure.

Strauss-Kahn said economic growth in Jamaica should be flat this year but recover about half-a-percentage point next year.

That forecast has been sharply cut from a previous IMF growth estimate of 2 per cent for 2008 and 2009.
"This sharp revision in outlook speaks to the speed at which global prospects have deteriorated," he added.

He told a news conference, following discussions with senior government officials, that Jamaica should reduce its high public debt and introduce measures to minimise the impact of the crisis on the poor.

"We agreed on the need for measures to minimise the social impact of the global financial crisis, while at the same time reducing the high public debt, which is a major cause of slow economic growth," the IMF chief said.

He lauded the government's economic policy steps to address the effects of the crisis.

"The successive interest rate increases observed this year, seeking to stabilise foreign exchange markets and to reduce inflation expectations, have been timely and appropriate," Strauss-Kahn said.

"Developing a framework for consolidated financial sector supervision should also be given a high priority, especially in terms of assessing aggregate vulnerabilities of banks and non-bank financial institutions," he added.

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