Page 11 - Caribbean-Central America Profile 2018
P. 11

REGIONAL



                                       CARIBBEAN-CENTRAL AMERICA PROFILE 2018


        REGIONAL ECONOMIC OVERVIEW AND OUTLOOK


        The Latin America and Caribbean region seems   declining by 4.7 percent in the second quarter,   Growth in the Caribbean  tourism-dependent
        to have turned the corner: after disappointing   as local  and federal  governments  tightened   economies in 2017–18 is projected  to be 2.4
        growth over the past six years, economic   measures to cool the housing market.  percent,  up from 2.1 percent  in 2016. For
        activity in Latin America and Caribbean region   According to the  World Bank, Latin America   commodity  exporters,  growth is  projected  to
        remains on track to recover gradually in 2017–  and Caribbean is expected to expand by 1.2%   rise  in  2017/2018  to  1.3 percent, from  –3.3
        18 as the global economy gathers steam and   in 2017, followed by 2.1% in 2018. Mexico   percent in 2016. There is, however, substantial
        recessions in a few countries in the region come   will keep growing, and Central America and the   variation  across countries. Economic activity
        to an end. Long-term growth, however, remains                             in tourism-dependent  economies  is estimated
                                             Caribbean will grow faster. In Central America,
        weak, hampering  income  convergence  toward                              to have expanded in the first half of 2017.
                                             oil price dynamics, uncertainty about future US
        advanced economy levels.                                                  There are a few exceptions, however, such as
                                             migration policies, and higher external demand   Barbados, where growth in 2017 is estimated
        Global economic growth increased in the first   have underpinned growth performance  in the   to have slowed, reflecting  necessary fiscal
        half of 2017 to 3.4 percent because improved   first half of 2017. Inflation  accelerated  in the   consolidation efforts.
        performance in the advanced economies   first quarter of 2017 in most countries because
        and continued assistance  from emerging and   of recovering oil and food prices and, partially,   In many cases, weather swings and hurricanes
        developing  countries.  Advanced economies   domestic  and external  demand.  In the  second   are  expected  to take  a toll  on overall  growth
        outturn was due to enhanced economic activities   quarter  of 2017, given  small  output  gaps, a   this year, including  in  Antigua  and Barbuda,
        in the  US and Euro  Area that  positively   slowdown  in the oil price recovery softened   Dominica,  St. Kitts and Nevis, and Haiti,
        impacted global demand and commodity prices   inflation  pressures. Potential  changes in US   which is still rebuilding from the effects of
        to further support emerging and developing   migration  policy and extension of temporary   Hurricane  Matthew  in  October  2016. Slightly
        economies’ growth. Emerging economies’   protection  status for El Salvador, Honduras,   faster  growth is projected  for 2018, based on
        growth continued to reflect the performance of   and Nicaragua,  while remaining  a major risk,   the acceleration  in global  demand,  as well as
        China and India with growth of 6.9 percent and   so far have benefited the region through higher   country-specific factors, such as the entry of the
        7.2 percent respectively. Developing countries’   remittances  inflows  that  supported  private   new international airport in St. Vincent and the
        growth was 4.5 percent buoyed by improved   consumption.                  Grenadines.  Reconstruction  activity  following
        commodity  prices and higher exports. Global   Exports of agricultural  and manufacturing   the  hurricanes  could  have  a  positive  impact
        economic recovery favourably impacted labour   goods benefited  from both higher external   on growth in subsequent years beyond what is
        market  conditions while higher commodity   demand  from  the  United  States  and  better   projected in the baseline.
        prices increased headline inflation and reduced   terms  of trade.  External  demand  for tourism   The  performance  of commodity  exporters  has
        deflationary pressures.                                                   generally  been weaker.  Trinidad  and  Tobago
                                             in Costa Rica,  the  Dominican  Republic,  and
        In the United States, weakness in consumption   Panama also expanded at a solid pace. Panama’s   was hit  hard by lower oil  and gas prices  and
        in the first quarter turned out to be temporary,   services balance additionally benefited from the   production outages in 2014–15, and Suriname
        while business investment continued to   expansion of the Panama Canal. These factors   by lower commodity  prices, the shutdown
        strengthen, reflecting in part a recovery in the   helped narrow current account deficits, which   of alumina production,  and necessary fiscal
        energy sector. Growth is projected at 2.2 percent   continue  to be largely financed  by foreign   consolidation.
        for 2017 and 2.3 percent for 2018. Hurricanes   direct investment. Financial systems are stable   The downturn in these economies is estimated to
        Harvey,  Irma,  and  Maria  increase  near-term   and  sovereign  spreads  have  contracted  for  all   have extended into 2017, and positive growth is
        uncertainties,  including  about  the size  and   countries except  El Salvador. However, the   projected for 2018. Growth has been stronger in
        timing of rebuilding efforts.        Economic Commission for Latin America and   Guyana, supported by two new large gold mines
                                             the Caribbean (ECLAC) has stated that Central   and positive outlook ahead of the beginning of
        Canada’s growth forecast for 2017 has been   America’s economies are forecast  to expand
        revised upward from 2.5 to 3 percent, owing to   3.4% in 2017 and 3.5% in 2018.  oil production in 2020.
        a stronger-than-expected growth outcome in the                            In  Mexico,  economic  activity  remained  solid
        first half of 2017 and the authorities’ supportive   For the English- and Dutch-speaking Caribbean,   in the first half of the year despite uncertainty
        cyclical  policies.  The  economy  expanded  by   ECLAC projected an average  growth at 0.3%   about  future  trade  relations  with  the  United
        an annualized rate of 4.5 percent in the second   for 2017, a figure that was downwardly revised   States, a decline in oil production, and relatively
        quarter, marking the strongest quarterly growth   versus the July’s projection, mainly due to   tight monetary and fiscal policies. As a result,
        rate since 2011. Household spending, buoyed by   the  damage caused by the  Irma  and  María   growth is projected  to  reach  2.1 percent  in
        gains in employment and earnings, and energy   hurricanes in some countries. In 2018, however,   2017. However, the uncertainty  surrounding
        exports  were  the  most  important  contributors   increased dynamism is forecast with a growth   the  negotiations  of the  North  American  Free
        to second quarter growth, while business   rate of 1.9%, influenced  in some cases by   Trade Agreement, along with domestic political
        investment  and nonenergy exports showed   spending efforts aimed at reconstruction as well   uncertainty  and tighter  financial  conditions,
        further signs of recovery. Housing activity   as a somewhat more dynamic global context in   will increasingly  weigh on consumption  and
        slowed, with investment in residential structures   terms of growth and foreign trade.  investment,  more than  offsetting  the positive


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