IMF says Caribbean countries still struggling to overcome global economic meltdownTuesday, April 19, 2016
WASHINGTON, United States (CMC) — A senior official of the International Monetary Fund (IMF) says with the global economy still struggling, many countries in Latin America and the Caribbean are facing a harsher world than they did a few years ago.
"Therefore, the growth outlook is weaker in advanced and emerging economies alike," said Alejandro Werner, the director of the IMF’s Western Hemisphere Department.
He told a news conference over the weekend that the favourable external financial conditions of the past several years have become more volatile, and risks of a sudden tightening are on the rise.
"Against this backdrop, economic activity in Latin America and the Caribbean has been revised downward compared with our January update, and is likely to contract for a second year in a row in 2016.
"Basically, we are projecting an average rate of growth of minus 0.5 per cent for this year. But the growth outlook varies substantially within the region. We have in South America where, let’s say, the deeper slowdown and the recession countries are concentrated — in Central America and the Caribbean and Mexico where we have most of the countries benefiting from the declining price of oil and therefore, economic activity in this subregion of Latin America and the Caribbean is accelerating a bit.
"As I said, therefore, the news isn’t all that bad because we have these subregions that are exhibiting some acceleration, and an important reduction in the current account deficits, and a strengthening of their fiscal balances."
But when asked to state the IMF’s recommendations for small, open-commodity producers that have suffered in terms of trade shocks, Werner replied,"Obviously it’s a case-by-case issue and we do not like to generalise our policy recommendations."
However, he said in the case of Trinidad and Tobago or other countries in the Caribbean, including Suriname, "I think these are countries that started with currency regimes that are more rigid than the ones we saw in South America.
"There are also countries that, in many cases, are expected to have an important increase in income in the next few years from positive supply shocks, and I think there the recommendation is to achieve some gradual ‘flexibilisation’ of the exchange rate to accommodate the external shock; and I think the most important anchor in these cases would be to really set the foundations for the fiscal policy to be in line with a new reality.
"I mean, in some of these countries the decline in terms of trading applies a significant reduction in public sector income. Therefore, in these cases, and in the case of Trinidad and Tobago these are countries where the debt levels are not very, very large, so they do have time to do these adjustments, so they can do them gradually, minimising any impact, protecting social expenditures.
"So in a sense, I think they have to lay down a very good strategy of adjusting their public finances through time to reflect this new reality and I think that’s the basis of the conversation we have had with the authorities," Werner said.
He told reporters that a team had visited Trinidad a few weeks before, and "obviously we will be putting out our report after it has been approved by the board".
Prime Minister Dr Keith Rowley has warned citizens to curb spending as a result of declining revenue due to the fall in oil prices on the global market.
He has told Trinidad and Tobago that his administration is implementing policies that would, in the long run, prevent the oil-rich twin island republic having to go to the Washington-based financial institution for assistance and its accompanying harsh economic policies.