Tuesday, April 21, 2009Negativity Slowing Regional Economies

The Trinidad GuardianCaribbean Economies Affected By Negative Psychology

Caribbean economies are more affected by a negative psychology, which has created a growth slowdown, said Central Bank Governor Ewart Williams. “I think the region has been hit much more by a negative psychology than any of the structural factors that we can point to,” Williams said. “I think there’s a feeling, a loss of confidence, in regional economies we have created for ourselves, we have talked ourselves into a growth slowdown, and we are doing it successfully.”

Williams was speaking on Thursday at the Hemispheric Private Sector Forum, held on the Caribbean Princess cruise ship. The vessel is docked at the Port of Port-of-Spain, to accommodate visitors attending the Fifth Summit of the Americas, which is being held at the Hyatt Trinidad Regency. He was on a panel that looked at economic stimulus packages and the opportunities for businesses. Williams said he doesn’t think the region is going to get out of the economic slowdown until there are signs of growth “reappearing” in the United States or in industrialised economies, which, he said, was unfortunate. Stating that financial systems in the Caribbean are less integrated in the global economy than in Latin America, Williams said the Caribbean financial system has not faced any distress, despite the collapse of the largest insurance conglomerate in the region.

“Unlike many Latin American countries, most Caribbean economies are not able to adopt counter-cyclical fiscal policies because of the absence of fiscal space. With the exception of T&T, countries in the region have been facing acute fiscal challenges,” Williams said. “Excluding T&T, countries in the region are running fiscal deficits ranging from two per cent of gross domestic product (GDP) to six per cent of GDP.” “Moreover, they have little scope for financing fiscal stimulus programmes since their debt burdens are also at crisis levels. “He said a study done by the International Monetary Fund (IMF) cited that the Caribbean contained some of the most highly indebted countries in the world, with debt ratios averaging about 90 per cent of GDP, in one case reaching about 150 per cent of GDP. “Unless something comes to break that vicious circle, I don’t think we would see growth,” he said. “Therefore, once the international economy starts to turn around, I think that would improve our chances of a recovery.”

The Central Bank governor said tourist visits to the Caribbean are estimated to have fallen by up to five per cent during the second half of 2008 and are expected to decline further in 2009.

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