The World Bank on Tuesday predicted that economic growth in the Caribbean is expected to strengthen to 7.1 per cent this year, with robust performance continuing in 2025 at 5.7 per cent.
In its latest Global Economic Prospects report, the financial institution said that excluding Guyana, growth is forecast at 3.9 per cent in 2024 and four per cent in 2025, driven by moderate tourism recovery and remittances.
According to the World Bank report, real gross domestic product (GDP) growth for The Bahamas in 2024 will be 2.3 per cent declining to 1.8 per cent the following year, while the Barbados’ economy will register a 3.7 per cent growth, dropping to 2.8 per cent in 2025.
The report said that Dominica’s growth of 4.6 per cent this year, will decline slightly to 4.2 per cent the following year with Grenada registering growth of 4.3 per cent this year dropping to 3.8 per cent in 2025.
The World Bank report is predicting that Guyana’s economic growth this year will be 34.3 per cent before declining to 16.8 the following year.
Haiti is the only Caribbean Community (CARICOM) country to register negative growth this year, pegged at minus 1.8 per cent, but improving to 1.9 per cent the following year.
Jamaica’s economic growth this year is projected at two per cent declining slightly to 1.6 per cent in 2025, while St Lucia’s economic growth has been put at 2.9 and 2.4 per cent respectively for the next two years.
St Vincent and the Grenadines’ economic growth for this year is put at five per cent, declining to 3.9 per cent next year, while the Dutch-speaking CARICOM country of Suriname will register growth of three per cent annually for the next two years.
In the Global Economic Prospects report, the World Bank noted that in the latter part of 2023, Latin America and the Caribbean (LAC) experienced a slowdown in economic growth due to the lingering effects of monetary tightening.
It said while early 2024 showed some signs of economic firming, the recovery has been uneven across the region.
According to the outlook, growth in LAC is projected to further decline to 1.8 per cent in 2024 before picking up to 2.7 per cent in 2025 as interest rates normalise and inflation decreases. It said commodity prices are expected to support LAC exports, although subdued growth in China could limit demand for key commodities.
“The forecast is subject to several risks, predominantly to the downside. These include potential tighter global financial conditions, elevated local debt levels, and a slowdown in China’s growth affecting LAC’s exports.
“Climate change-related extreme weather events also present a risk. Conversely, stronger economic activity in the United States could positively impact Central America and the Caribbean.”
The World Bank said while facing economic headwinds in 2024, LAC is expected to see a gradual recovery in 2025, supported by declining inflation and accommodative monetary policy.
“The region’s economic performance will be influenced by a mix of domestic and international factors, with commodity prices and global demand playing moderate roles.”
In its report, the World Bank said that the global economy is expected to stabilise for the first time in three years in 2024, but at a level that is weak by recent historical standards.
The World Bank’s latest Global Economic Prospects report noted that global growth is projected to hold steady at 2.6 per cent in 2024 before edging up to an average of 2.7 per cent in 2025-26.
That is well below the 3.1 per cent average in the decade before COVID-19. The forecast implies that over the course of 2024-26 countries that collectively account for more than 80 per cent of the world’s population and global GDP would still be growing more slowly than they did in the decade before COVID-19.
“Four years after the upheavals caused by the pandemic, conflicts, inflation, and monetary tightening, it appears that global economic growth is steadying,” said Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President.
“However, growth is at lower levels than before 2020. Prospects for the world’s poorest economies are even more worrisome. They face punishing levels of debt service, constricting trade possibilities, and costly climate events.
“Developing economies will have to find ways to encourage private investment, reduce public debt, and improve education, health, and basic infrastructure. The poorest among them, especially the 75 countries eligible for concessional assistance from the International Development Association, will not be able to do this without international support,” Gill added.
The latest Global Economic Prospects report also features two analytical chapters of topical importance. The first outlines how public investment can be used to accelerate private investment and promote economic growth.
It finds that public investment growth in developing economies has halved since the global financial crisis, dropping to an annual average of five per cent in the past decade. Yet public investment can be a powerful policy lever.
For developing economies with ample fiscal space and efficient government spending practices, scaling up public investment by one per cent of GDP can increase the level of output by up to 1.6 per cent over the medium term.
The second analytical chapter explores why small states, those with a population of around 1.5 million or less, suffer chronic fiscal difficulties. Two-fifths of the 35 developing economies that are small states are at high risk of debt distress or already in it. That’s roughly twice the share for other developing economies.
Comprehensive reforms are needed to address the fiscal challenges of small states. Revenues could be drawn from a more stable and secure tax base. Spending efficiency could be improved, especially in health, education, and infrastructure.
Fiscal frameworks could be adopted to manage the higher frequency of natural disasters and other shocks. Targeted and coordinated global policies can also help put these countries on a more sustainable fiscal path, according to the report.
