Senior World Bank Official Says Caribbean Economies are Still Recovered to 2019 Levels

BRIDGETOWN, Barbados – A senior World Bank official Tuesday said that the gross domestic product (GDP) of the Caribbean has not yet recovered to its 2019 level as the region emerges from being among the hardest hit regions by the COVID-19 pandemic.

Economist William Maloney (Photo courtesy of the World Bank)“We are not expecting that to be the case until 2024 and that reflects the overall slow rate of recovery in the region. Part of that is we know that many of the islands are tourism dependent and we had a hard time getting a handle on COVID,” said William Maloney, the World Bank’s chief economist for Latin America and the Caribbean.

He told reporters that many countries in the region are still recording low vaccination rates against the virus that has killed and infected millions of people globally.

He said most were below 40 percent “which leaves us vulnerable to whatever new variant comes. It is important to realize that COVID is in recession right now, but it is very unpredictable and we have to be prepared for whatever is coming and that means those vaccination rates will have to rise…”

Maloney said that the region was also hard hit by the Ukraine crisis occasioned by Russia’s invasion of the Eastern European country since February “because we are net food and fuel importers, with perhaps the exception of Trinidad and Tobago, and so that puts additional strain on household budgets and government finances.

“So this has made it a very difficult couple of years for the Caribbean. The bank has programs I think for 19 countries in the region, focusing precisely on issues like fiscal sustainability, building resilience to natural hazards,” he said.

The chief economist said that in the case of Haiti, the country is in a “very difficult situation."

“They continue to struggle with multiple prong crisis. You have got gang violence, lingering political institutional and instability and we have had persistent vulnerability to natural shocks. “COVID of course exacerbated these and unfortunate to date, it has a low vaccination rate.”

Maloney said that the economy continues to contract, adding “we are seeing negative two and half percent in 2022 and minus 0.1 percent in 2023.

“So the short-term and the medium-term situation is not extremely positive. The bank continues to support recovery from the 2021 earthquake by strengthening disaster risk capacity ….and we have also been working hard to address problems to access to quality learning and to mitigating Haiti’s food insecurity”.

He said the bank’s portfolio for Haiti has increased by 40 percent over the last two years “but …it remains a very difficult situation”.

He said some Caribbean countries would be registering economic growth this year, declining in 2024.

For example, Barbados is expected to register a 10.5 percent growth this year, dropping to five percent next year, Jamaica will record a 3.2 percent growth in 2022, falling to two percent next year, Dominica will register 5.8 percent this year, declining to five percent the following year.

The World Bank is predicting that Grenada’s economic growth this year will be 3.8 percent, falling slightly down to 3.4 percent the following year. St. Lucia’s economy will grow by 7.9 percent this year, and six percent next year, while St. Vincent and the Grenadines will register five percent this year and increasing to 6.3 the following year. The Bahamas will register eight percent growth in 2022 and 4.1 percent in 2023.

Suriname will experience 2.3 percent growth this year, increasing to three percent next year, while Belize will have registered two percent growth for this year and 2024. The World Bank did not give an economic growth forecast for Trinidad and Tobago.

Maloney said Guyana has been having “astronomically high growth and we are expecting 57.8 percent this year, falling to 25.2 percent next year.

“Those are extra ordinary growth rates reflecting the development of this new sector and any government will have a challenge in managing those resource flows to be sure that you did not set off inflation within the country and the central bank would need to take measures to control that,“ Maloney added.

The economist said Caribbean countries in general would benefit working as group on issues such as seeking concessionary financing from international agencies “articulating their concerns…would be a very positive thing” and that the World Bank “stands ready to discuss these issues”.

Regarding Latin America and the Caribbean countries, Maloney said some had been hit hard by rising energy and food prices “but often what we find in the region is subsidized oil and fuel prices across the board which means not only helping out those poor families but subsidizing fuel prices for the entire population including those that don’t need it.

“So the savings we are talking about is precisely the gains that would be gleaned from better targeting those kinds of relief efforts. So it is not about eliminating all support to families. It is probably better from an economic point of view to not subsidize these products directly but to increase transfers to vulnerable families and that’s probably more efficient from an economic point of view.

“But again to reiterate we are not talking about to eliminating support to poor families hit by these higher prices,” he added.

The World Bank official referred to what he termed “the goldilocks” question that made reference to several Caribbean countries tightening monetary policies with the private sector expressing concern over that measure and at what stage should the central banks push up interest rates.

“We have to be completely honest that the tools we have for combatting inflation are not fine instruments. Raising interest rates works on inflation precisely by reducing aggregate demands for products….

“So the art for this … is you are going to raise interest rates enough so that people could see that inflation is under control and that expectations aren’t rising …but not enough to drive the economy into a recession.