| Related Links: | Articles on The Greater Caribbean This Week |
| Letters Menu | Archival Menu |
The most serious declines were experienced by Dominica, St Kitts/Nevis and Haiti. The economic difficulties of Dominica are the result of falling banana exports with steadily rising government spending. This produced a severe fiscal crisis that is now being addressed by a stabilisation programme. St. Kitts was affected by the decline in tourism; while in Haiti, the continuing political crisis has prevented much-needed aid funds.
Barbados and Antigua-two countries whose per capita incomes are among the highest in CARICOM-also suffered a year of economic decline, reflecting the fall-out of tourism revenues.
Jamaica, Guyana and St. Lucia saw marginal growth in 2002. However, only St. Vincent, Grenada and Trinidad and Tobago managed to produce sufficient growth to raise per capita income by more than two per cent. Economic expansion in these countries was driven by construction booms, fuelled by capital inflows on government and private account.
CARICOM’s poor performance reflected the adverse external environment that also impacted other countries in the Greater Caribbean. Declines in tourism and in banana exports and pressure on off-shore banking associated with world recession, the war on terror and political uncertainty, were major factors. Natural disasters also affected agricultural production and exports in several countries.
One worrying consequence was the widening of the fiscal deficit in several countries. As growth has slowed down or turned negative, tax revenues have stagnated or declined. Governments have been under pressure to augment employment and income by increased spending. This can only be financed by increased borrowing, which increases the deficit.
The Central Government deficit as a proportion of the GDP reached 10.9 per cent in Belize, six per cent in Jamaica, and 4.1 per cent in Barbados. In the Organisation of Eastern Caribbean States (OECS), the fiscal deficit had already reached 6.5 per cent of the GDP in 2001.
Fiscal retrenchment is therefore on the agenda of many CARICOM countries. Already, Dominica and Jamaica have taken steps to cut spending and raise additional taxes. The challenge will be to ensure that vital services such as education and health are maintained in the face of expenditure cuts. These services impact on economic productivity and on the ability to attract investment, both, local and foreign.
There is also a challenge to political and social management. Countries that have seemingly successful experiments in social consensus models of macro-economic policy-making may have lessons for the rest of CARICOM, as governments wrestle with the painful choices of fiscal austerity.