Caribbean Development Bank Forecasts 8.6% Economic Growth in 2024, Driven by Guyana's Oil Boom: Chief Economist Warns of Risks Ahead

The 19 economies served by the Caribbean Development Bank are forecast to grow on average by 8.6 per cent in 2024, up from last year’s 6.7 per cent — driven largely by Guyana’s oil boom, the bank’s chief economist said Tuesday.

But excluding Guyana, the projected growth rate falls to 2.3 per cent, in line with sluggish growth worldwide and the normalisation of economic conditions in the Caribbean, said Ian Durant, the CDB’s director of economics at the bank’s annual review and forecast.

But the below-average global growth and “persistently high inflation” could undermine the expected modest performance, he warned.

And the bank looked back on a past year of multiple disruptions, pointing to the lingering effects of the COVID-19 pandemic inflation and supply chain bottlenecks that could follow into this year.

Durant said: “Escalations in existing geopolitical conflicts or the emergence of new ones that disrupt stability, consumer confidence and investments, critical elements for sustaining economic growth.

“These events may also trigger supply chain disruptions and rekindle volatility in global commodity prices, necessitating additional monetary tightening that could weaken external travel demand from the region’s primary source markets.

Additionally, challenges linked to climate change, including natural disasters pose risks to the region. CDB recognizes that higher and sustained levels of economic growth are needed to achieve greater prosperity for the region’s citizens.

“Raising potential output and building economic resilience over the medium to long term will require reducing high export concentration by raising competitiveness so increased productivity, productivity, and lower production costs.”

To support these efforts, he revealed the CDB was collaborating with the International Trade Centre (ITC) to assess and recommend improvements in logistics performance. The bank is also aiming to facilitate critical spending needed for development, with fiscal consolidation efforts expected to continue in 2024.

“Some key recommendations included digitalization of trade and customs processes, investments in modern air and support infrastructure, distribution centres and storage facilities that support efficient movement of goods, modernisation of customs, immigration and tariff rules to facilitate trade and remove barriers and, implementation of information systems with data capture sharing an inventory control to create transparency and optimize logistics.

“CDB is supporting its borrowing member countries in these efforts through various interventions to accommodate some of the critical spending needed to accelerate development,” Durant said.

“Marginal expansion in the fiscal stance of some borrowing member countries is projected in 2024. But most are expected to maintain positive primary balances, bolstered by continued economic growth.

“This would allow for continued convergence of the fiscal and debt targets as fiscal consolidation efforts to rebuild buffers and resilience to future shocks are expected to continue in 2024, with ongoing initiatives to strengthen tax administration and boost revenue.”

Addressing the challenges and triumphs faced by CDB borrowing member countries in 2023, Durant noted that global trade and supply chain challenges, exacerbated by geopolitical events such as Russia’s invasion of Ukraine, led to significant increases in international commodity prices.

To curb inflation, Durant said contractionary monetary policies were implemented, contributing to a global economic slowdown.

Despite these challenges, Caribbean economies displayed resilience, rebounding from the pandemic shock with an average growth rate of 6.7 per cent in 2023. While slightly slower than the 2022 rate, this reflects a return to historical averages after the unprecedented impact of the pandemic.

“By the end of 2023, 11 of our borrowing member countries had overtaken pre-pandemic open levels. Higher oil production in Guyana was a significant driver of average regional growth in 2023.

“Production increased by 35.2 per cent, influencing growth in the non-energy sectors and contributing to an overall expansion of Guyana’s economy of 32.9 per cent.

“Economic activity in the other commodity exporters, Suriname and Trinidad and Tobago also expanded, but at a more measured rate, with the energy sector in Trinidad and Tobago recording a slight contraction,” the CDB’s director of economics said.

He also revealed the tourism-dependent region saw the ongoing recovery of the industry as a key driver, with service-exporting countries growing at an average of 2.4 per cent . The return to normalcy in mobility and travel, coupled with the easing of health restrictions, contributed to the recovery, with total arrivals reaching 99 per cent of pre-COVID levels by September 2023.

tinued recovery of airlift and the return of festivals and sporting events across the region. . . . tourism outturn, combined with ongoing private and public construction activity drove real growth for most boring member countries.

“Unfortunately, Haiti continued to be the exception to the original performance, as the country grapples with persistent instability and high inflation, which contributed to weak economic performance.”

Despite positive labour market trends, he revealed that gender gaps persist, with women experiencing higher unemployment rates than men. While there has been some moderation in youth unemployment, it remains elevated compared to other segments of the population.

With regard to inflation and the associated risks to food and energy, Durant noted that security was a major concern in 2023. He said although inflation rates eased across the region, persistent high energy costs and forecasted supply chain issues kept inflation elevated. Currency depreciation also played a role in one borrowing member country.

“In response to the persistent price pressures, some borrowing member country governments extended price relief into 2023, easing the burden of higher living costs on poor and vulnerable populations. Governments also contended with elevated borrowing costs amid tight financing conditions.

“Nevertheless, with the continued strengthening of economic activity, government revenues and overall fiscal outcomes improved. The average regional primary surplus therefore increased from 0.5 cent per of GDP in 2022 to 0.8 per cent in 2023.”

(RG)