An International Monetary Fund official warned on Friday there is no room for complacency as countries continued to face strong headwinds despite economic growth shaping up to be better than expected, buoyed by encouraging early signs of a rebound in tourism.
Nigel Chalk, Acting Director of the IMF Western Hemisphere Department, also pointed out that the Caribbean region, which was already facing high debt, will continue to experience rising commodity prices that may require more aggressive policy measures.
The IMF is forecasting economic growth of 3.3 per cent for Barbados this year and 8.5 per cent next year.
Chalk declared that the IMF is willing and ready to provide additional financial support as he spoke on Thursday during a press conference where he presented the IMF’s regional economic outlook for Latin America and the Caribbean.
He said: “I think generally across the Caribbean the priority has to be investing in public health, expanding vaccinations and getting access to the vaccinations . . . and also it will be very key in the coming months just to see how tourism will develop through the winter months and how the economy comes out of this winter to the extent that tourism does bounce back. We are seeing some encouraging early signs that tourism is improving quite strongly.”
But pointing out that economic growth for the Caribbean and Latin America was expected to be 6.3 per cent this year and 3 per cent in 2022, he said this growth will be uneven due to a lot of uncertainty surrounding the pandemic and new investments.
He said the growth was also dependent on policy measures.
“Given these uncertainties, countries should prepare for this recovery not to be a linear path . . . There is a long and winding road ahead with setbacks likely to be encountered along the way,” said Chalk.
“This is not a time for complacency,” he added.
He pointed out that the pandemic had left the region with higher debt than usual and a very difficult social situation, while indicating that the young, less educated and women were feeling the brunt of the effects from the pandemic, which has resulted in high unemployment, as well as children due to the prolonged school closures.
Warning that these trends were likely to take years to reverse, Chalk said the IMF stands ready to provide additional financial support to Barbados and other countries in the region.
He said: “I think the fiscal (space)is limited but there are options domestically to provide additional support for the poor in some countries and the Fund has provided significant resources through the SDR (Special Drawing Rights) allocation to the region, and stands ready if the countries need assistance either for capacity development reasons or for financial assistance.
“The Fund is standing ready and indeed we are thinking very much about a Resilience and Sustainability Trust that will be very well suited for the Caribbean to help provide longer-term financing to support them.”
Chalk blamed rising consumer prices in the region on rising commodity prices globally, sector-specific constraints and supply chain disruptions.
He said while several central banks have increased interest rates as a result, policymakers “may have to react more assertively” if inflation continued to rise or not meet expectations.
He recalled that Barbados and other tourism-dependent economies in the Caribbean “really got hammered very hard by COVID”, adding that they would continue to face a “significant decline” in tourism arrivals due to external shocks associated with the pandemic.
Chalk said he was satisfied that the Barbados IMF-funded austerity programme was “going very well”, adding that the Government has been very committed to implementing all of the policies under the programme.
“I think we saw even during this difficult situation the programme assistance and support from the Fund really helped to mitigate some of the damage that was done by COVID in Barbados,” he said.
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