BRIDGETOWN, Barbados (CMC)— The World bank Wednesday warned Caribbean countries against  adopting a “one size fit all approach” to their ongoing economic problems noting also that the scope for  diversification is limited because of the small size of many regional countries.

The Washington-based financial institution has released its latest report titled “Recovering Growth, Rebuilding Dynamic Post COVID Economies Amid Fiscal Constraints” noting that the scars from the coronavirus (COVID-19) crisis will take years to fade if countries in Latin America and the Caribbean don’t take immediate steps to boost a lacklustre recovery from the pandemic, with poverty now at its highest level in decades.

The World Bank noted that although regional growth is projected to recover at 6.3 per cent in 2021, with vaccination accelerating and COVID-19 deaths falling, for most countries it will fail to completely reverse the 6.7 per cent contraction last year.

Furthermore, growth forecasts for the next two years sink to below three per cent, returning to the low growth rates of the 2010s and fuelling fears of another lost decade of development.

To generate the kind of growth rates that would move the region forward and lessen social tensions the region needs to urgently implement long delayed but feasible reforms in infrastructure, education, health, energy policy, and innovation, as well as tackle new challenges posed by climate change, according to the report.

“Countries in the region made enormous efforts to help families in the midst of the pandemic. Now, the challenge is to generate a robust recovery which provides job opportunities and heals the wounds of the crisis,” said Carlos Felipe Jaramillo, vice president for Latin America and the Caribbean at the World Bank.

Nevertheless, a regional recovery faces multiple barriers. Any recurrence of the virus will hit growth, while persistent global inflationary pressures could lead to higher borrowing rates, depressing demand. Meanwhile, high private sector indebtedness may limit its capacity to drive the recovery, while rising public deficits and debt limit potential for future government activity.

“Efforts to mitigate the effects of the crisis triggered hefty spending increases, leading to higher deficits and public debt,” said William Maloney, chief economist for Latin America and the Caribbean at the World Bank, explaining that average public debt had risen by 15 points to 75.38 per cent of gross domestic product (GDP).

“Given the imperative to stimulate more dynamic, inclusive and greener growth within this context of scarcer resources, governments will need to rethink how efficiently and how well they spend public resources.”

Maloney told reporters that the question of managing sovereign debt “is on everybody’s mind.

‘We saw an increase in sovereign debt in the region of about 15 percentage points which for a year and a half is a lot,” he said, noting that “some countries have affair amount of room to absorb this kind of increase.

‘Others have much higher debt levels to begin with and those are the ones we have to be attentive to going forward. At this point there is no one size fits all, I think we need to look at a variety of different ways to…reducing it.

“We could talk about things like debt for environment swaps and things like that in the context of climatic agenda, but I would say at a basic level this is one area we need to be very closely following just because the amounts suddenly jumps so much and in the context of international interest rates, potentially rising, it could become a problem,” Maloney told reporters.

Maloney said that the COVID-19 pandemic had shown that Caribbean countries reliant on one particular sector, such as tourism, had been adversely affected and that going into the future there could be other pandemics that could have similar consequences.

But he said that the idea of diversifying could prove troublesome for some Caribbean countries given that some are much smaller and ‘it would be very hard to diversify away from that one comparative advantage that we have.

“So I think we might need to think a little bit more about how to arm ourselves against crises like these again in the future.

“For instance if we look across the Caribbean some countries have recovered, their tourist industries much quicker than others and partly because the health system manage to vaccinate people much quicker and therefore make the country more attractive to travellers.

“Some parts of the Caribbean right now are quite active,” Maloney said, noting for example, the Dominican Republic “has had very healthy growth rates this year.

‘So yes, diversifying is important, but we have to be honest about what’s possible,” the chief economist added.