In its new Regional Economic Outlook, just released, the International Monetary Fund (IMF) says that the Caribbean is finally turning the corner amid “vast challenges” and gradually recovering from last year’s severe recession.
The report said tourism appears to be on the rebound, but noted that “headwinds from weak labour markets in advanced economies” constrain its growth prospects. “The key challenge lies in consolidating public finances while strengthening competitiveness,” the IMF noted.
After declining by more than three per cent in 2009, the IMF said real Gross Domestic Product (GDP) for the Caribbean as a whole is projected to post only marginal gains in 2010, growing by an average of about 1%, after relatively low debt ratios, and benefiting from ongoing reconstruction efforts in Haiti.
During the first half of 2010, the IMF said tourist arrivals in the Caribbean increased by an average of 3.5% compared with the same period last year, adding that this was led by increased arrivals from the United States and Canada, against continued declines from Europe. Smaller islands in the region have experienced a “sharper and more prolonged decline in tourist arrivals than some of the larger islands…Destinations that significantly reduced hotel prices following the crisis experienced milder declines in arrivals.”
The report also concluded that “Boosting competitiveness and growth over the medium term remains a key policy challenge. For the whole region, improving productivity will require sustained structural reforms, including enhancing the role of the tourism sector.”
The IMF said labour markets would need to be more flexible to allow the region to better react to external shocks and increased competition for tourists from inside and outside the region.