cdb urges regional governments to d.e.c.i.d.e

Time to D.E.C.I.D.E.

February 24, 2016

Dr. Justin Ram

Director of Economics

Caribbean Economic Review and Outlook

Presentation Outline

• Part A: Global Economic Outlook

• Part B: Caribbean Economic Review and Outlook

• Part C: Vision and policy response

Global Economic OutlookPart: A

Global growth > in 2016

Source: IMF WEO January 2016 Update

Uncertainty a toxic cocktail

Looking Down

• Geopolitical uncertainty

• Stock market turmoil

• Slowdown in emerging markets, especially China

• Currency volatility

• Low oil prices costing producers and financers

• Possible instability in Europe, Brexit

• Increased risk of US recession?

• Zika virus

• El Nino

Looking up

• US unemployment rate the lowest since 2009

• Increase in US wages

• Low oil prices benefitting consumers

IMF recently revised down global growth for 2015 and 2016

Source: IMF WH REO October 2015

Mixed fortunes closer to home

Caribbean Economic Review and Outlook

Part: B

Continued growth < comparators

Sources: IMF, ECCB and CDB. Data for 2015 are preliminary CDB estimates

BMC growth in 2015

Sources: BMCs, CDB preliminary estimates

Tourism: Most regional destinations saw continued recovery in stayover arrivals

Source: Caribbean Tourism Organisation *2015 figures as at month indicated

Growth (%) in Stay-Over Arrivals 2010-2015*

Commodity prices are falling: mixed fortunes and risks for BMCs

Source: IMF, World Gold Council

The fiscal story

Sources: IMF, CDB estimates

Trade: foreign exchange reserves

Unemployment is still high

Source: BMC Statistical Offices

Low productivity does not bode well for growth

Source: The Conference Board. 2015. The Conference Board Total Economy Database™, May 2015, http://www.conference-board.org/data/economydatabase/

Still tough going for businesses

Source: World Bank Group

Here’s why we score poorly in Doing Business rankings


Logistics: BMCs lagging behind


What’s the 2016 Outlook? CDB forecasts regional growth of 0.3%

Source: CDB

Where are the risks in 2016?

• Global economic downturn

• Political uncertainty in Venezuela

• Continued warming of US/Cuba relations

• Potential threat of Zika virus

• Commodity exporters need to make difficult decisions

• US Presidential election

• Olympics in Rio de Janeiro

• Reduction in correspondent Banking relationships

• Weather-related events

Our Vision for the Caribbean: Time to D.E.C.I.D.E. and Policy

Recommendations

Part: C

Our Vision for our Caribbean economies

What do we want our Caribbean economies to be?

Dynamic, Export-oriented, Competitive, Inclusive, Diverse and Environmentally-resilient economies (D.E.C.I.D.E.)

This requires:

Private sector led growth

Educated and flexible labour force

Regionally integrated

Government as facilitator and efficient regulator

Energy security

Policy Actions: DECIDE

1. We need a strategy that will allow us to take advantage of

technological innovation, to identify and encourage higher

productive activity.

2. At the same time we need to improve the Investment Climate:

make it easier for private sector to thrive (doing business reforms).

3. Labor Market Reforms: increase flexibility, freedom of movement,

participation and productivity.

4. Human Capital Development: Investment in quality education for

all, with emphasis on science, technology, engineering and

mathametics (STEM).


5. Fiscal Consolidation: Fiscal rules, increase efficiency of revenue collection and expenditure, prioritise capital investment, reform of subsidies.

6. Although we have low fuel prices we still need energy reform that will improve our energy security, through use of RE in energy mix and greater EE (oil and non-oil producers).

7. Policy environment that assists MSMEs such as access to credit.

8. Targeted and affordable social protection, this is applicable social safety nets, transfers and subsidies.


9. Maximise regional integration and take advantage of free trade agreements such as EPA and seek new agreements.

10. Improve Regional Transport and Logistics: increase efficiency of movement of people and goods across the region.

11. Mandate building and infrastructure codes to improve resilience.

12. Measures required to minimise the spread of new diseases.

13. Improve the level of national savings to support investment and fiscal buffers.

Questions?

Thank you for your attention

cdb urges regional governments to d.e.c.i.d.e

Economy & Finance