WASHINGTON, CMC—The Inter-American Development Bank (IDB) says that with the economic and social stresses of the coronavirus (COVID-19) pandemic receding, Caribbean economies are experiencing continued growth into 2024.
“Risks and Opportunities for Caribbean Economies in a Diverging World” is part of the Caribbean Economics Quarterly report series, focusing on the economic performance of The Bahamas, Barbados, Guyana, Jamaica, Suriname, and Trinidad and Tobago.
The new edition analyzes how global economic conditions may impact Caribbean economies. It identifies near-term opportunities and risks.
“Caribbean economies have recovered well from the pandemic and the recent global economic headwinds. Now is the time to focus on the structural reforms at both the national and regional levels to promote more robust and sustainable growth,” said Anton Edmunds, the general manager for IDB’s Caribbean Country Department .”
In the report, the IDB said that after the strong economic recovery of 2021–2023, Caribbean economies continue to grow faster than Latin America and the Caribbean region, though country circumstances vary.
It said, for example, that economic growth in Guyana is expected to be over 30 percent this year, while tourism-oriented economies are expected to grow only 2.6 percent.
At the same time, economies are experiencing diverging economic growth rates, with the US growing faster than others, leading to different approaches to economic policies.
IDB said that the Eurozone may lower interest rates sooner and more decidedly than the United States. This situation could create both risks and opportunities moving forward.
Other key findings from the reports include the evolution of global interest rate changes, which will eventually impact external financing costs for Caribbean countries.
In addition, if US interest rates remain high (5.3 percent federal funds rate as of May 2024) while other major central banks cut interest rates, the US dollar will likely strengthen relative to other major currencies.
This could imply genuine exchange rate appreciation for Caribbean economies with fixed exchange rates tied to the dollar.
The report notes that public debt to GDP has returned to the already relatively high pre-pandemic levels, averaging 74 percent in 2023 for the countries analyzed. Further work on strengthening macro frameworks is a fundamental precondition for growth.
The new report noted that a renewed focus on regulatory reforms, human capital, and resilient infrastructure could make Caribbean economies “ready for take-off” to higher levels of growth rather than returning to potential GDP growth pre-pandemic, which was less than one percent in tourism-oriented economies.
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