ECONOMIC activity in the Caribbean is recovering faster than projected in October 2021, led by a strong pickup in tourism activity during the second half of 2021, according to the International Monetary Fund (IMF).

In revised numbers released earlier this week, the fund said it expects growth in the region will range from an average 3.2 per cent in tourism-dependent countries to 20.2 per cent for commodity exporters.

For Jamaica, the outlook is less rosy. The IMF data show Jamaica’s economy should expand by 2.5 per cent in 2022, down from 4.4 per cent last year.

For the broader Latin America and the Caribbean region, the expectation is that growth will average 2.5 per cent in 2022, down from 6.8 per cent in 2021.

“Latin American’s growth rebound from the pandemic was strong, but was poised to slow even before the war in Ukraine,” said Ilan Goldfjan, director, western hemisphere department at the IMF.

Goldfjan added, “The war brings a further shock to inflation.” The expectation is that prices could rise by about 11.2 per cent in the region as food and fuel costs rise. In Jamaica, inflation is projected at 8.5 per cent this year by the IMF. In Haiti, it is expected to reach 25.5 per cent, while consumers in Suriname are expected to see prices rising by 38.9 per cent. Venezuela continues to record the highest increase in prices in the region with the IMF projecting prices will rise in that South American country by 500 per cent.

So far policymakers across the region have reacted decisively by tightening monetary policy and implementing measures to soften the blow of higher food and energy prices on the most vulnerable—thus mitigating the risks of social unrest.

“These actions, together with the hard-won credibility, have allowed them to keep long-term inflation expectations anchored. This is important for stability and predictability. Central banks will still need to remain vigilant and continue taking decisive actions if needed to keep long-term inflation expectations in check,” the IMF warns.

“But those are not the only risks. If the war broadens…it may generate financial distress, and we know that the region is very well affected by global financial conditions,” Goldfjan added. He said with the US increasing interest rates, it could have an impact on capital flows, on the depreciation of the currencies, and higher borrowing conditions. And the financial conditions locally in the countries also tighten.

But the news was not all bad for the region.

Goldfjan told journalists that higher prices for commodities can be an opportunity to boost economic activity for net commodity exporters.

“In a more strategic way, some of the countries in the region who position themselves as the solution to the global problem of food insecurity and the need to provide more food to the world. So, they can position themselves as a solution to the problem, exporting food, increasing the production having a positive impact,” he concluded.