Page 11 - Caribbean-Central America Profile 2018
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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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