Unlocking Growth in the Caribbean

Most Honorable Prime Minister Portia Simpson Miller

Honorable Minister of Finance Peter Phillips

President Warren Smith

Deputy Managing Director Min Zhu

Director, Western Hemisphere Alejandro Werner

Ministers

Dear Partners and colleagues,

It is a pleasure to be here today and be able to share some thoughts about how to move forward a sustainable growth agenda for the Caribbean.

It is often forgotten that before the last global financial crisis hit, people in the Caribbean benefited from the region’s steady economic progress, improving health, education, and standard of living. The Caribbean region’s GDP per capita increased six fold in the last 3 decades and poverty has been reduced. For instance, in Jamaica, poverty rates dropped almost 20 percent in two decades.

However, the global financial crisis exposed the fragility of the Caribbean region. When the global financial crisis hit in 2008, Caribbean nations experienced declining or negative growth, and as a result unemployment increased.

This, together with weak safety nets, reversed some of the hard won social gains as poverty levels increased, reaching almost 40% of the population.  Lack of fiscal space meant that governments were not able to cushion these declines with counter cyclical stimulus programs; and where they did, they did so at the cost of further worsening primary balances.

Minister Philips already mentioned that the effects of the global crisis have lasted longer in the Caribbean than other regions of the world. And while South American countries enjoyed the arrival to the trade scene of large commodity importers such as China, and benefited enormously from positive terms of trade. That did not happen in the Caribbean where onn the contrary, terms of trade worsened.  

On top of this, the region is exposed to natural disasters, an additional concern that builds more vulnerability. For this reason, the Caribbean cannot be analyzed with the same criteria than other regional economies.

For instance, size matters.   Smaller economies tend to be concentrated in a few sectors.

Therefore regional integration designed to take advantages of economies of scale and public sector modernization are critical.

To tackle this situation, several countries including Jamaica and Grenada have already embarked upon significant reform programs. And progress has been made. But, here I join Deputy Managing Director Min Zhu recognizing the impressive efforts that the authorities of the Caribbean have done in order to achieve this. At the same time, the complexity of identifying which reforms are needed to ignite economic growth has also been highlighted.

So what else can be done?

Efforts to restore fiscal sustainability and unleash private sector growth are needed.  There is no doubt that putting the fiscal houses in order is a must.

It is also clear that improving the environment for doing business remains necessary. And here again I join the Deputy Managing Director Min Zhu in recognizing the important role that the private sector can play as the engine for growth. Jamaica and other countries including the Dominican Republic and Trinidad and Tobago are putting in place reforms to improve the business climate, but more needs to be done in filling in the large infrastructure gap, enhancing regional and global connectivity, and reducing the high cost of electricity and dependence on oil. 

The private sector can play an important role in financing infrastructure through Public Private Partnership.  At the same time such projects need to be carefully designed and structured from a financial point of view so that they are well suited for an environment of rising interest rates and increased volatility.

A number of countries are also embarking on competitiveness strategies that focus on fostering investment in competitive niche sectors to unleash innovation and creativity including tourism, logistics, health services, and creative industries.

Building on key strengths, the region is also looking at new opportunities

• One of the most valuable assets in the Region is its young people. By leveraging young talents, Jamaica and other Caribbean countries are positioning themselves to become technology hubs.  We already see emerging some successful initiatives providing services to the virtual economy through the development of smartphone applications, technical assistance (through call centers, for example) and digital animation. In this sense, the quality of education will be key. A lot of progress has been made in terms of access to education which is almost universal, but a lot needs to be done to improve quality of education.
• The region also has a large renewable energy potential. A recent World Bank study showed that seven Eastern Caribbean countries have potential for geothermal energy generation, which would help reduce costs for their oil-dependent electricity sector.
  
  
• There is also an opportunity to build centers of excellence in several areas of the health sector, where a group of countries have a clear competitive edge.
• Finally, there is an opportunity to develop a blue agenda by supporting economic sectors dependent on the ocean ecosystem including sustainable seafood production, tourism, energy and carbon storage, as well as natural infrastructure. A growing number of Caribbean nations have expressed their desire to develop and implement a vision and roadmap for better management and more sustainable use of their ocean resources.

The World Bank Group– including IFC and MIGA – stands ready to support Caribbean nations in the pursuit of these ambitious development agendas. WBG President will meet with Caribbean Governors again at the next Annual Meetings in Lima to discuss progress on our ambitious agenda.

Thank you