IMF Predicts Stronger Economic Growth For Caribbean

by Amanda Banks, Tax-News.com, London

26 September 2005

The International Monetary Fund has predicted stronger rates of economic growth for the Caribbean during 2005 and 2006 as the region undergoes a tourism-led recovery from an economic slowdown caused by several severe weather events.

According to the Washington-based institution's semi annual World Economic Outlook, real economic growth in the Caribbean region is expected to reach 3.6% in 2005, and rise to 4.8% in 2006.

The IMF attributed these stronger rates of growth to a likely recovery in the region's tourist industry following last year's particularly active hurricane season, during which few countries and territories emerged unscathed, and from which some, most notably Grenada and the Cayman Islands, are still recovering.

Grenada was devastated by Hurricane Ivan, which struck the country in September 2004. The total damage to Grenada is estimated to be in excess of E.C.$2.4 billion (US$899 million), more than 200% of Grenada’s 2003 nominal GDP. Nearly 90% of the houses in the country (approximately 28,000 houses) were damaged, of which approximately 30% were so badly damaged that they required complete replacement. However, On July 14, 2005, just ten months after Ivan, as Grenada continued to rebuild, Hurricane Emily, a storm with sustained winds of 90 miles (145 kilometers) per hour, passed directly over the island exacerbating the severe losses suffered as a result of Hurricane Ivan.

The IMF went on to caution that Caribbean countries must keep control of debt in order to stay on the growth track.

“The key policy challenge in most countries is to strengthen budgets and to ensure public debt sustainability," the fund noted.

The IMF's Economic Counsellor Raghuram Rajan also warned that high oil prices remain a danger, especially to those small economies which are less well equipped to absorb an oil price shock.

“Countries should pass through oil increases to citizens instead of subsidising them, so that citizens make the right consumption choices,” said Rajan.

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