The Caribbean`s Economic Crisis

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CaribWorldNews, NEW YORK, NY, Fri. July 23, 2010: `You`re fired!` The words stabbed him like a knife as David Sullivan become yet another victim of the economic crisis.

He added to the thousands of tourism employees in the Caribbean who have been made redundant as a result of the unfavourable economic climate.

The IMF regional economic outlook that `the effects of the financial crisis on the Caribbean will likely persist into 2010,` is coming to pass. What adds to the gloom  is that remittances are on their way down, argues Caribbean economist and Managing Director of CAP-M Research, Jwala Rambaran.

He argues that `remittances are down sharply in the Caribbean, especially those coming from the US which is at the centre of the crisis.`

Rambaran says this is destructive to any economic recovery as the Caribbean is actually the most dependent region in the world on remittances. In relation to GDP, remittances account for at least 15 percent of the region`s GDP before the global recession, he said.

 `For countries like Jamaica, Haiti and Guyana remittances play critical macroeconomic and social roles,` said
Rambaran. `They are often as important as foreign direct investment in providing balance of payments support, and they defuse social tensions by helping to finance spending in lower to middle income households.`

The economist further expressed pessimism that the region is growing out of the recession. He argued that even Trinidad and Tobago the strongest country in CARICOM is still feeling constraints as a result of the recession. He added that the tourism-based countries in the Eastern Caribbean have been hit quite hard and are not expected to recover fully until at least 2011. His outlook for remittances is supported by the report coming from the IMF which states that `the outlook for remittances is not favourable.` 

But his pessimism is not shared by the World Travel and Tourism Council. They contend that there are definite signs that the recession is coming to an end adding that even during the recession some islands showed increases in tourism arrivals, which is a major economic indicator for Caribbean. The rate of decline appears to be levelling off and is not as dramatic as the beginning of the recession which breeds optimistic beliefs, WTTC claims.

Moreover, UN`s World Tourism Organization Barometer states that `the Caribbean is showing signs of stabilisation and recovery.`

Professor of Economics at Cardiff University, Keith Whitfield, notes that the Caribbean is definitely on its way to recovery. 

`The phrase often is that when the major countries sneeze the Caribbean region catches a cold because they are heavily dependent on selling goods to the major economies,` he said, but argued that some of the major world economies are on their way to recovery adding that some countries are even out of recession, therefore the Caribbean is gradually getting there.

`Signs are reasonably good for  these economies, and I believe that the worse is over for the developing countries, however we still have some way to go in order to say that they are at a reasonably stance,` said Whitfield. He added that all of the talk about a double dip recession and a long term depression was over the top. `I believe that we are beginning to see that this was a severe recession and the world economy is starting to turn up again,` he added.

So if his argument that an improvement in the U.S. economy will bounce on to the Caribbean then the economic prospect for the region should be optimistic.

The IMF noted that `the U.S. economy appears to have hit bottom in the second quarter of 2009 and is showing signs of recovery after a sharp contraction.` Further, the UNWTO notes that experts have picked up an air of optimism from the U.S.

Moreover, UNWTO argues that while things will be challenging, results show that the decline in international tourism may have bottomed out. Data from Oxford Economics support this stance.
And in its annual report Preliminary Overview of the Economies of Latin America and the Caribbean 2009, there are positive prospects for growth rates for most countries. However, the organization expressed reservation as to whether the recovery will be constant.

Nevertheless, as the UNWTO notes, one of the main challenges to the recovery of the recession is the unemployment rate and this is both for the Caribbean and major economies.

The IMF notes that `bleak employment conditions and a protracted process of households` balance sheet repair will weigh down on the outlook for remittances and tourism in the LAC region, especially affecting countries in the Caribbean.`

 This leaves many in the region, especially in the tourism industry, apprehensive, fearing the possibility of hearing the words: `you`re fired!` – By Sarah Peter/Special To CWNN

 


 

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