World Bank forecasts growth in Caribbean economies
In a recently published Global Economic Prospects Report for 2024, the World Bank shines a hopeful light on the economic prospects of the Latin American and Caribbean region.
Specifically, the report underscores that Caribbean economies are poised for growth in 2024 and 2025.
A slowdown in 2023
The report recounts the economic events of 2023, characterized by a notable economic slowdown across Latin America and the Caribbean.
During this period, the region saw a growth rate of just 2.2 per cent.
The deceleration was attributed to a constellation of factors, including mounting inflationary pressures, stringent monetary policies, a languid global trade environment, and the disruptive impact of adverse weather events.
Gradual recovery on the horizon
Despite the challenges faced in 2023, the report foresees a gradual recovery on the horizon.
Projections indicate that the region’s economic growth is slated to increase to 2.3 per cent in 2024 and further accelerate to 2.5 per cent in 2025.
While the lingering effects of previous monetary tightening are expected to persist in the short term, their influence is anticipated to wane.
As inflation rates recede, central banks are projected to trim interest rates, thereby removing impediments to investment growth.
Caribbean economies and the tourism sector
The report singles out the Caribbean economies for a closer look, noting that, excluding Guyana, which is experiencing a resource boom, these economies are anticipated to grow by 4.1 per cent in 2024 and 3.9 per cent in 2025.
This growth can be attributed, in part, to the ongoing expansion of the tourism sector, which continues to play a pivotal role in the region’s economic stability.
Steady growth for Central America
In Central America, the forecast indicates a consistent growth trajectory, with rates of 3.7 per cent projected for 2024 and a slightly improved 3.8 per cent for 2025.
The report credits this optimistic outlook to a moderate increase in remittances, particularly during the upcoming year.
However, it also highlights looming long-term challenges such as diminishing potential for economic growth due to declining total factor productivity and an aging population.
Navigating risks and uncertainties
While the report paints a cautiously optimistic picture of the region’s economic prospects, it is not without its fair share of risks and uncertainties.
The World Bank emphasizes the potential disruptions posed by escalating geopolitical tensions, particularly in the Middle East, which could trigger fluctuations in energy markets and drive up oil prices.
Furthermore, the report underscores the heightened risks stemming from extreme weather events, amplified by the specter of climate change. These events pose significant threats to climate-sensitive sectors like agriculture, energy, and fishing.
Additionally, external factors and global trends contribute to the complex risk landscape. For instance, persistent core inflation in advanced economies may result in enduringly high global interest rates, constraining the monetary and fiscal policies of the Latin American and Caribbean region.
The report also highlights the far-reaching consequences of an unforeseen deceleration in China’s economic growth, which could have considerable spillover effects on external demand and, consequently, impact the region’s commodity exports.
