Caribbean countries ended 2013 on a stronger economic footing, says CDB

Georgetown, May 30, 2014.- Caribbean countries ended 2013 on a more solid economic footing than it had done since the start of the 2007/2008 global economic recession, according to figures released by the Barbados-based Caribbean Development Bank (CDB).

The CDB, which is holding its 44th Annual Meeting of the Board of Governors here, said that many of its borrowing member states (BMCs) recorded increases “albeit modest in economic activity”.

CDB President Dr. Warren Smith said that “at the regional level, growth and sustainability were recurring themes in discussions about performance”.

The CDB said that preliminary estimates indicate that the economic activity in the region grew by an average of 1.5 per cent last year, up slightly from a revised figure of 1.2 per cent for 2012.

The region’s premier development financial institution noted that higher incomes and employment in advanced economies and renewed flows of foreign direct investment(FDI) contributed to solid growth in construction activity and continued recovery in tourism in most of the BMCs.

At the same time, lower commodity prices had a dampening effect on mining and agriculture in some BMCs, but also assisted in containing inflationary pressures.

The CDB said that despite lower commodity prices, growth was nevertheless led by commodity exporters, In Guyana, Haiti and Suriname, rates of expansion between four and six per cent were driven by strong construction and agriculture outturns.

Agro-processing also contributed to increased manufacturing output in Guyana. In addition, there were small but noteworthy contributions from the rapidly developing tourism industries in these economies.

The CDB said growth in Guyana and Suriname was supported as well by continued investment in mining, despite the fall-off in international commodity prices.

Rather than lower oil prices, ongoing maintenance and reduced oil field yield, respectively, led to contractions in mining output in Belize and Trinidad and Tobago, the other major commodity exporters in the region.

However, improved overall growth performances in these two economies reflected the general upturn in construction and tourism activity. Trinidad and Tobago also benefited from a rebound in manufacturing.

The CDB said that moderate growth of between one and three per cent were recorded in Antigua and Barbuda, The Bahamas, Cayman Islands, Grenada, St. Kitts and Nevis, St. Vincent and the Grenadines and Turks and Caicos Islands and linked the improved economic position to the general improvement in construction and tourism.

“However, economic activity was sluggish, flat or contracting in the remaining BMCs, as key service industries bucked regional trends. Negligible growth was estimated for Jamaica in 2013, following a marginal decline in 2012, based on indications that a first-half contraction due to underperforming agriculture, manufacturing and tourism was negated in the second half of the year by an improvement in tourism and growth in mining and quarrying.

“Similarly, after contracting in 2012, economic activity is estimated to have been flat in Dominica, as declines in construction and agriculture were offset by increases in manufacturing and distribution and a turnaround in tourism and distribution.

“In Montserrat, economic activity contracted slightly, driven by declines in the dominant public administration and construction sectors.

“The slight contraction estimated for Barbados in 2013 was driven by declines in tourism and construction activity. The Barbadian economy has remained stagnant since 2008, with growth ranging from -4.1 percent.

Last year marked the sixth consecutive annual contraction in Anguilla and the second in both the British Virgin Islands (BVI) and St. Lucia since 2009.

The CDB said poor performances in construction in all three countries, as well in financial services in Anguilla and BVI, offset growth in tourism activity.

It said that the robust growth in construction activity in most BMCs had positive spin-off effects on the distribution, financial services, real estate and transportation sectors.

“Notably, there was significant public investment in critical economic infrastructure, including roads in Antigua and Barbuda,The Bahamas, Belize, Jamaica and Turks and Caicos Islands, as well as construction of a new airport in St.Vincent and the Grenadines and airport expansions in Antigua and Barbuda and Turks and Caicos Islands.

“In Haiti, despite ongoing issues of under-implementation of public investment projects, construction activity, including the post-earthquake reconstruction effort, continued to be a significant driver of overall output growth”.

The CDB said there was also strong growth in private construction activity, including residential construction in Antigua and Barbuda, Belize and Guyana, together with significant FDI-driven tourism related development in The Bahamas, Belize, Cayman Islands, Grenada, St. Kitts and Nevis, St. Vincent and the Grenadines and Turks and Caicos Islands.

But the bank noted that in contrast, declines in construction were recorded in the five BMCs for which overall growth is estimated to have declined, namely Anguilla, Barbados, BVI, Montserrat and St.Lucia.

“In these BMCs, declining FDI for tourism-related projects, lower domestic demand and fiscal constraints on government capital investment had a dampening impact on construction activity. There was also a significant slump in construction in Dominica, as public sector projects neared completion, while private activity remained sluggish.

“Based on the available data on visitor arrivals, it is estimated that most regional destinations saw a continued recovery in tourism output in 2013. This assessment reflects generally positive arrivals trends in the higher-value-added stay-over segment of the industry, offsetting the impact of challenges in the cruise segment,” the bank said.

It said with the ongoing economic recovery in major extra-regional source markets, stay-over arrivals data available for seven to 11 months of the year show increases across most destinations.

“Notably, the European market has generally shown improvements relative to 2012, when deeply recessionary conditions and the application of the UK Air Passenger Duty (APD) had depressed arrivals from that source.

“However, some regional destinations have registered overall declines in stay-over arrivals, attributable.

largely to a combination of airlift challenges, such as airline closure and route cancellations, in the United States and /or intraregional markets, as well as the high cost of intra-regional travel”.

The CDB said that these factors have been particularly important in the negative outturns for destinations, that depend heavily on the US and/or intra-regional markets like Antigua and Barbuda, The Bahamas, Barbados, Dominica, Grenada, and St. Vincent and the Grenadines.

BMC performances in the cruise segment of the tourism industry have been more mixed. Destinations such as The Bahamas, Barbados, Belize and St. Kitts and Nevis recorded strong growth in cruise arrivals, whereas others such as BVI, Cayman Islands, Dominica and Grenada registered significant declines.

The bank said that the ongoing restructuring within the Caribbean cruise industry has resulted in the withdrawal of smaller vessels, which has negatively affected those regional destinations lacking the facilities to cater to the new mega-ships plying Caribbean routes.

“There have also been indications that some destinations need to improve their product offerings,” the CDB said in its annual report.