Caribbean economies seem to be big trouble

dedetriniking

Registered User
A gloomy time | Trinidad Express Newspaper | Commentaries

A gloomy time
By Ronald Sanders
Story Created: Dec 27, 2013 at 11:05 PM ECT
Story Updated: Dec 27, 2013 at 11:05 PM ECT
The announcement on December 13 by the government of Barbados that it will lay-off over 3,000 public servants in January as a first step in cutting back expenditure and reducing national demand for goods and services has rightly rattled other Caricom members. Concern has been greatest in neighbouring eastern Caribbean countries, particularly the six independent ones that, with the British overseas territory, Montserrat, form the Organisation of Eastern Caribbean States (OECS).

While the economic recession that began in late 2008 has abated in North America and Europe, its effects have been prolonged in those Caribbean countries whose economies are highly reliant on services, the principal one being tourism. From the start of the recession, policies were required to cut government spending on anything but economically sustainable projects, scale back borrowing to finance only infrastructural development that would lift the tourism product, and prepare the economies to take immediate advantage of a return to economic health of their main markets. Instead for many countries, it was business as usual. The net effect is large debt-to-GDP ratios, significant fiscal deficits, and in many countries little capacity by governments to pay wages and salaries without incurring even more debt.
Only four commodity-exporting Caricom states—Belize, Guyana, Suriname and Trinidad and Tobago—have escaped the alarming prospect of implementing austerity measures in order to survive.

The Barbados situation was set out by the International Monetary Fund (IMF) after its annual inspection in early December of the state of the country’s economy. The inspection is euphemistically called an “Article IV consultation”, and the statement issued by the IMF at its conclusion is a highly sanitised script designed not to offend the government concerned while, at the same time, setting out worrying developments.

In short, the IMF report on Barbados was as follows: the government’s deficit is expected to rise to 9.5 per cent of GDP in 2013/2014; the government wage bill rose to 10.3 per cent of GDP in 2012/13 —“the highest in the region”; and, most worryingly of all, international reserves had fallen to US$468 million at end-October.
The majority of Caricom countries should be troubled for two reasons. Barbados has been regarded for decades as a model of good governance and stability in the Caribbean. To the extent that this reputation is eroded in the international community, the region will suffer on the perception that if matters have reached a sorry pass in Barbados, it must be a lot worse in other countries.

At a more fundamental level, Barbados is the second largest importer of Caricom goods. As an example, Barbados imported goods from Caricom worth US$616 million (2012), US$600.2 million (2011) and US$523.3 million (2010). Therefore, a cut in Barbados’ demand for goods (resulting from a lay-off of over 3,000 public servants and consequential job losses in the private sector) will have an impact on the quantum of Barbados’ imports from Caricom. Those affected countries will either have to find alternative markets or face losing some foreign exchange earnings and jobs associated with their exports to Barbados.

The economic situation in the majority of the neighbouring six independent countries of the OECS has been similar to Barbados’ for some time. Unemployment has been in double digit figures for over four years and rises every year; foreign exchange receipts are moderate; and investment in education and knowledge creation has declined.
Over the last four years, none of the OECS countries, The Bahamas, Barbados or Jamaica has enjoyed economic growth of two per cent or more; indeed, for much of the period their economies weakened. When it is considered that these economies require approximately five per cent growth per year simply to absorb school-leavers into employment and maintain existing infrastructure, it can be seen that the last four years of minuscule or no growth have set them back significantly.

The only Caricom countries that showed growth over the period 2010 to 2012 were three of the four commodity-exporting countries—Belize 5.3 per cent (2012), 1.9 per cent (2011), 2.7 per cent (2010); Guyana 4.8 per cent (2012), 7.8 per cent (2011), 3.0 per cent (2010); and Suriname 4.8 per cent (2012), 4.7 per cent (2011) and 4.1 per cent (2010). In the case of Trinidad and Tobago, it had a mere blip in economic growth of 0.2 per cent in 2012 after a decline in 2011 of 2.6 per cent and a similar blip in 2010 of 0.2 per cent, but consistent oil and gas revenues helped it to weather the storm.

On top of all this is the high debt-to-GDP ratio of almost all of the Caricom countries projected for 2013 by the Western Hemisphere Department of the IMF. With regard to debt-to-GDP ratios, apart from Trinidad and Tobago (33.4 per cent) and Suriname (37.1 per cent), the others are troubling. At the high end are Jamaica (142.7 per cent), Grenada (115.8 per cent) and Antigua and Barbuda (95 per cent); and at the lower end are Guyana (58.2 per cent) and The Bahamas (56.1 per cent). None of the others are below 75 per cent. Unless debts are reduced considerably by the countries with debt-to-GDP ratios of over 70 per cent, debt repayment will consume much of their dwindling foreign exchange reserves, summoning them to the hard path that Jamaica has travelled recently with the IMF and that now beckons for Barbados.
 

robblaten

New member
A gloomy time | Trinidad Express Newspaper | Commentaries

A gloomy time
By Ronald Sanders
Story Created: Dec 27, 2013 at 11:05 PM ECT
Story Updated: Dec 27, 2013 at 11:05 PM ECT
The announcement on December 13 by the government of Barbados that it will lay-off over 3,000 public servants in January as a first step in cutting back expenditure and reducing national demand for goods and services has rightly rattled other Caricom members. Concern has been greatest in neighbouring eastern Caribbean countries, particularly the six independent ones that, with the British overseas territory, Montserrat, form the Organisation of Eastern Caribbean States (OECS).

While the economic recession that began in late 2008 has abated in North America and Europe, its effects have been prolonged in those Caribbean countries whose economies are highly reliant on services, the principal one being tourism. From the start of the recession, policies were required to cut government spending on anything but economically sustainable projects, scale back borrowing to finance only infrastructural development that would lift the tourism product, and prepare the economies to take immediate advantage of a return to economic health of their main markets. Instead for many countries, it was business as usual. The net effect is large debt-to-GDP ratios, significant fiscal deficits, and in many countries little capacity by governments to pay wages and salaries without incurring even more debt.
Only four commodity-exporting Caricom states—Belize, Guyana, Suriname and Trinidad and Tobago—have escaped the alarming prospect of implementing austerity measures in order to survive.

The Barbados situation was set out by the International Monetary Fund (IMF) after its annual inspection in early December of the state of the country’s economy. The inspection is euphemistically called an “Article IV consultation”, and the statement issued by the IMF at its conclusion is a highly sanitised script designed not to offend the government concerned while, at the same time, setting out worrying developments.

In short, the IMF report on Barbados was as follows: the government’s deficit is expected to rise to 9.5 per cent of GDP in 2013/2014; the government wage bill rose to 10.3 per cent of GDP in 2012/13 —“the highest in the region”; and, most worryingly of all, international reserves had fallen to US$468 million at end-October.
The majority of Caricom countries should be troubled for two reasons. Barbados has been regarded for decades as a model of good governance and stability in the Caribbean. To the extent that this reputation is eroded in the international community, the region will suffer on the perception that if matters have reached a sorry pass in Barbados, it must be a lot worse in other countries.

At a more fundamental level, Barbados is the second largest importer of Caricom goods. As an example, Barbados imported goods from Caricom worth US$616 million (2012), US$600.2 million (2011) and US$523.3 million (2010). Therefore, a cut in Barbados’ demand for goods (resulting from a lay-off of over 3,000 public servants and consequential job losses in the private sector) will have an impact on the quantum of Barbados’ imports from Caricom. Those affected countries will either have to find alternative markets or face losing some foreign exchange earnings and jobs associated with their exports to Barbados.

The economic situation in the majority of the neighbouring six independent countries of the OECS has been similar to Barbados’ for some time. Unemployment has been in double digit figures for over four years and rises every year; foreign exchange receipts are moderate; and investment in education and knowledge creation has declined.
Over the last four years, none of the OECS countries, The Bahamas, Barbados or Jamaica has enjoyed economic growth of two per cent or more; indeed, for much of the period their economies weakened. When it is considered that these economies require approximately five per cent growth per year simply to absorb school-leavers into employment and maintain existing infrastructure, it can be seen that the last four years of minuscule or no growth have set them back significantly.

The only Caricom countries that showed growth over the period 2010 to 2012 were three of the four commodity-exporting countries—Belize 5.3 per cent (2012), 1.9 per cent (2011), 2.7 per cent (2010); Guyana 4.8 per cent (2012), 7.8 per cent (2011), 3.0 per cent (2010); and Suriname 4.8 per cent (2012), 4.7 per cent (2011) and 4.1 per cent (2010). In the case of Trinidad and Tobago, it had a mere blip in economic growth of 0.2 per cent in 2012 after a decline in 2011 of 2.6 per cent and a similar blip in 2010 of 0.2 per cent, but consistent oil and gas revenues helped it to weather the storm.

On top of all this is the high debt-to-GDP ratio of almost all of the Caricom countries projected for 2013 by the Western Hemisphere Department of the IMF. With regard to debt-to-GDP ratios, apart from Trinidad and Tobago (33.4 per cent) and Suriname (37.1 per cent), the others are troubling. At the high end are Jamaica (142.7 per cent), Grenada (115.8 per cent) and Antigua and Barbuda (95 per cent); and at the lower end are Guyana (58.2 per cent) and The Bahamas (56.1 per cent). None of the others are below 75 per cent. Unless debts are reduced considerably by the countries with debt-to-GDP ratios of over 70 per cent, debt repayment will consume much of their dwindling foreign exchange reserves, summoning them to the hard path that Jamaica has travelled recently with the IMF and that now beckons for Barbados.
This man Ronald Saunders is not someone whose views I find compelling. While I agree that most regional countries have not reacted correctly to the international recession, his main unspoken recommendation seems to be further regional integration. This is just what NOT to do to deal with the economic slowdown.
 

robblaten

New member
I think Ronald Saunders is being a little over dramatic in his title to this piece and in some of the conclusions he seems to draw. We have just come off a worldwide recession. There are really few lessons to be learned from that by small international states, apart from you to react to it.
 

robblaten

New member
seem to be? IS!

all these little countries should just form one country and done, this mini states not working
On what evidence do you assert that regional countries would do better if they were governed together? Given that their economies are mostly competitive, rather than complimentary (selling the same services to an international market) and given that, together, they comprise a population no bigger than Ecuador, what strand of logic leads you to conclude that integration would be a good thing economically?

Have you really missed the OBVIOUS fact that the smaller countries in our region are generally better off than larger ones? From that how can you not conclude that being small is an advantage?

I have no idea what you mean by "not working", but I can only speak for the Bahamas. It's working pretty damn well, thank you. That is why we sensibly rejected CSME so strongly.
 

Oneshot

where de crix
On what evidence do you assert that regional countries would do better if they were governed together? Given that their economies are mostly competitive, rather than complimentary (selling the same services to an international market) and given that, together, they comprise a population no bigger than Ecuador, what strand of logic leads you to conclude that integration would be a good thing economically?

Have you really missed the OBVIOUS fact that the smaller countries in our region are generally better off than larger ones? From that how can you not conclude that being small is an advantage?

I have no idea what you mean by "not working", but I can only speak for the Bahamas. It's working pretty damn well, thank you. That is why we sensibly rejected CSME so strongly.
closer integration, means lower transaction costs, easier movement of capital (money and people), and better governance, for example. it would be written into the constitution for debt / gdp ratios, deficit / gdp ratios and so forth.

being a smaller country exposes you to greater risks, esp natural disasters. for example the US, one state economy can be devasted by a natural disaster, but since that state belongs to a federal system, gaining funding is never an issue.
 

robblaten

New member
closer integration, means lower transaction costs, easier movement of capital (money and people), and better governance, for example. it would be written into the constitution for debt / gdp ratios, deficit / gdp ratios and so forth.

being a smaller country exposes you to greater risks, esp natural disasters. for example the US, one state economy can be devasted by a natural disaster, but since that state belongs to a federal system, gaining funding is never an issue.
But lower transaction costs between whom???? easier movement of capital and people for whom???? Why do the Bahamas or Barbados, for example, need or want easier movement of capital between themselves and Jamaica or Trinidad? Does our FDI come from regional peers? of course it does not.

Better governance??? How in the hell do you figure that? Our governance is so good PRECISELY because we are such small and well managed states (I am speaking of the smaller regional states).

I am willing to take my chances with a natural disaster wiping out the Bahamas. But it would be much more likely wiped out by a political disaster like joining CSME.
 

robblaten

New member
closer integration, means lower transaction costs, easier movement of capital (money and people), and better governance, for example. it would be written into the constitution for debt / gdp ratios, deficit / gdp ratios and so forth.

being a smaller country exposes you to greater risks, esp natural disasters. for example the US, one state economy can be devasted by a natural disaster, but since that state belongs to a federal system, gaining funding is never an issue.
So why do you need regional integration in order to write into your constitution some restriction on debt / gdp ratios? What is stopping individual countries doing that right now?

Why not just simply let each regional country finds its own way in the world?
 
Not working for whom? Maybe for the Jamaican migrants ready to pounce in their thousands on the smaller, better run states.
your bahamian cockiness is a bit much now! what better run states you talking about? you dont realize most of these smaller islands living offa IMF?

and the only reason why people surviving is because these islands are mostly rural and people could go pick some green fig, plant some tomatoes and just live a simple life and still survive?

Barbados is under IMF
Dominica is under IMF
Antigua is under IMF


so what better run smaller states you telling me bout?
 

dedetriniking

Registered User
So the author is an alarmist? Barbados is not about to layoff 1300 government workers? The debt to earnings ratio for most of these countries aren't accurately quoted in the piece.....because if those numbers are accurate these countries are in trouble....and the level of poverty you see now will only get worse.

 

robblaten

New member
your bahamian cockiness is a bit much now! what better run states you talking about? you dont realize most of these smaller islands living offa IMF?

and the only reason why people surviving is because these islands are mostly rural and people could go pick some green fig, plant some tomatoes and just live a simple life and still survive?

Barbados is under IMF
Dominica is under IMF
Antigua is under IMF


so what better run smaller states you telling me bout?
Barbados and all of the OECS are well run states, despite the present difficulties. The UK has been under the IMF, not to mention Southern Europe. These things are just cyclical. It does not mean that every time you get a slowdown or recession, you jump up and toss out the window an economic and social model that has placed you, since independence, among a tiny number of black ex-colonies that have worked. It is just a freaking recession, man! And what's more IT IS NOW ENDING!!!!

To conclude that becoming a larger land mass and population would somehow make you better governed (ESPECIALLY since experience indicates that the very most effective ingredient in moving from 3rd world to 1st is BEING SMALL) is simply illogical. Don't these regionalists read books and look at the world before they make silly statements like 'being small is bad'???
 

robblaten

New member
So the author is an alarmist? Barbados is not about to layoff 1300 government workers? The debt to earnings ratio for most of these countries aren't accurately quoted in the piece.....because if those numbers are accurate these countries are in trouble....and the level of poverty you see now will only get worse.

What level of poverty? Are you seriously suggesting a country like Barbados or most of our region has some high level of poverty compared to most places? Please.

The reason the debt to GDP indicators deteriorated in the last few years is simple: THERE WAS A RECESSION!!!! Only a fool or a republican responds to a recession (when revenue receipts are down) by cutting spending to match it. This would exacerbate the fall-off in aggregate demand and deepen the recession.

Rather, you do what Saunders indicates in his opening paragraphs: you boost spending on infrastructure and other vital capacity-builders that have to be done anyway and can be paid for when economic conditions recover.

So basically, you will ALWAYS have these issues when there is a recession. You just have to make sure that when times get better you are best placed to maximise growth and then pay for the deficit spending you racked up in the recession. If Bim made any mistakes it was in not restructuring its spending away from the heavy social entitlements they have and towards infrastructure. But to point at debt deterioration alone as an indication that their basic development model is wrong is simply illogical.
 

dedetriniking

Registered User
Barbados and all of the OECS are well run states, despite the present difficulties. The UK has been under the IMF, not to mention Southern Europe. These things are just cyclical. It does not mean that every time you get a slowdown or recession, you jump up and toss out the window an economic and social model that has placed you, since independence, among a tiny number of black ex-colonies that have worked. It is just a freaking recession, man! And what's more IT IS NOW ENDING!!!!

To conclude that becoming a larger land mass and population would somehow make you better governed (ESPECIALLY since experience indicates that the very most effective ingredient in moving from 3rd world to 1st is BEING SMALL) is simply illogical. Don't these regionalists read books and look at the world before they make silly statements like 'being small is bad'???
I don't know that consolidation is the answer but clearly these countries need to do better. There are a few exceptions but these countries have been struggling even before the world recession hit.....its just made things worse.

I do hope that your optimism is borne out in the end though.
 

dedetriniking

Registered User
What level of poverty? Are you seriously suggesting a country like Barbados or most of our region has some high level of poverty compared to most places? Please.

The reason the debt to GDP indicators deteriorated in the last few years is simple: THERE WAS A RECESSION!!!! Only a fool or a republican responds to a recession (when revenue receipts are down) by cutting spending to match it. This would exacerbate the fall-off in aggregate demand and deepen the recession.

Rather, you do what Saunders indicates in his opening paragraphs: you boost spending on infrastructure and other vital capacity-builders that have to be done anyway and can be paid for when economic conditions recover.

So basically, you will ALWAYS have these issues when there is a recession. You just have to make sure that when times get better you are best placed to maximise growth and then pay for the deficit spending you racked up in the recession. If Bim made any mistakes it was in not restructuring its spending away from the heavy social entitlements they have and towards infrastructure. But to point at debt deterioration alone as an indication that their basic development model is wrong is simply illogical.
I'm a big believer in the bolded and that is why I think its a shame that the republicans in congress didn't allow Obama to carry out some of the vital infrastructure spending in his plan.

But america borrowing money from china to spend on their infrastructure is different from these small islands borrowing more than they can pay back from the IMF. These countries have economies based on the tourist dollar for the most part and their ability to pay back these loans is not assured.

In any case they can't sit by and cross their fingers in hope that the tourists will come back in droves....they need to start thinking outside the box a bit.
 

robblaten

New member
I don't know that consolidation is the answer but clearly these countries need to do better. There are a few exceptions but these countries have been struggling even before the world recession hit.....its just made things worse.

I do hope that your optimism is borne out in the end though.
I am extremely optimistic about the tourism industry in the region in particular. This is because I know that the perception of it as a passive industy, where you just sit and wait for people to visit your shores, is very wrong. It is a very active industry in which you control growth by policy. Almost all of the growth these days is in new markets (Latam and China) and in things like conventions, gaming and sport tourism. It just takes government and smart private sectors players acting together to ensure growth.

And if you look around the region, most governments have finally gotten over their anti-tourism hang-ups (they used to laugh at the Bahamas for being given over to tourism) and are seriously expanding their capacity in this sector. In a decade much of the region will be transformed economically because of it.
 

Oneshot

where de crix
So why do you need regional integration in order to write into your constitution some restriction on debt / gdp ratios? What is stopping individual countries doing that right now?

Why not just simply let each regional country finds its own way in the world?
so.. you skipped over the other points..
 

Oneshot

where de crix
I'm a big believer in the bolded and that is why I think its a shame that the republicans in congress didn't allow Obama to carry out some of the vital infrastructure spending in his plan.

But america borrowing money from china to spend on their infrastructure is different from these small islands borrowing more than they can pay back from the IMF. These countries have economies based on the tourist dollar for the most part and their ability to pay back these loans is not assured.

In any case they can't sit by and cross their fingers in hope that the tourists will come back in droves....they need to start thinking outside the box a bit.
how did the republicans stop infrastructure investment? nothing was stopped fella
 
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