The slow recovery of the US and European economies could spell trouble for many tourism-based Caribbean economies, according to Tao Zhang, deputy managing director of the International Monetary Fund (IMF) since August 2016.

“The US recovery has been softer than previously expected,” he said, while “uncertainty has risen in Europe as countries there move to overcome the difficulties of economic recovery and managing the process of Brexit.”

The slower recovery “means the pickup in tourist arrivals in the last two years could reverse in most tourism-dependent economies in the Caribbean”, he said.

He was addressing the 2016 High Level Forum on Shifting Tides: Challenges and Opportunities, an IMF regional seminar in Port of Spain, Trinidad, earlier this month before the US election.

“We project the Euro area to grow by only 1.7 per cent this year and 1.5 per cent in 2017,” Zhang said. “Likewise, the United Kingdom, a major source of tourist arrivals in the Caribbean, is projected to grow by a modest one per cent next year. But there are significant risks around this projection since the impact of Brexit remains unclear.”

But the news wasn’t all bad as Zhang added, “Recent data showing higher-than-expected third-quarter growth rates in both the UK and the US could provide room for optimism.”

Several regional prime ministers, central bank governors, private sector leaders and others attended the meeting, including Prime Minister Andrew Holness, Bank of Jamaica Governor Brian Wynter and Nigel Clarke of the Economic Growth Council from Jamaica.

Cuba’s rise as a new destination for US tourists was another area of concern.

Zhang said that the impact of the rapprochement between the US and Cuba was another “important new shift”.

“There are concerns that this otherwise encouraging development will cause US tourism to flow to Cuba at the expense of other Caribbean destinations.”

“But the region has shown its resilience on this front before — when the Dominican Republic emerged as a tourist destination — it can be done again.”

In fact, the group had a session on the issue titled ‘Spillovers from Cuba’ , with a panel led by Prime Minister Allen Chastanet of St Lucia, to which the press was not invited. The session explored the impact on the Caribbean’s tourism sector of the US-Cuba rapprochement, and the two likely challenges — the diversion of tourists away from other Caribbean island destinations to Cuba and opportunities.

The general concensus, however, was that the issue represented more of an opportunity than a threat, with the possiblity of tourists to Cuba later visiting other Caribbean destinations.

Global challenges include “another year of lacklustre growth” Zhang said, with projected global growth of 3.1 per cent for 2016.

Zhang noted that on a global level, commodity prices “appear to have bottomed out”, but are expected to remain at low levels and volatile.

“This is a much different situation than when we were here four years ago,” he said, referring to the last time the group met in Trinidad.

This bodes well for some countries, but was bad news for others.

“On the downside, oil-exporting countries like Suriname and Trinidad and Tobago have been hit hard,” Zhang said. “Trinidad’s economy is under pressure despite some savings during the good times. This makes the task even harder for the Government to rebalance policies in response to the low energy prices, particularly the fiscal stance”

But on the positive side, “low oil prices have benefited most other countries in the region”, he said. “Many of these countries have seen their external positions improve significantly. For example, Jamaica has eliminated much of its double-digit current account deficit in just a couple of years. And Guyana is experiencing its first external surplus in decades.”

Low prices or not, Caribbean countries should still seek to move away from oil he suggested. “There is still a need to reduce reliance on government subsidies and to expand the use of renewable energy,” he said.

Another major global issue was that “global financial conditions have eased and global financial regulations tightened” Zhang said, with interest rates in advanced economies expected to remain low. Meanwhile, efforts to combat money laundering and the financing of terrorism have intensified.

“The withdrawl of correspondent banking relationships presents clear and imminent challenges to the Caribbean. Several banks across the region have lost all or some of their correspondent banking relationships. International banks have stopped providing some services and have dropped clients that they consider to be high risk,” he said.