Economic growth has slowed throughout the Caribbean region, with decreased private sector activity, creating an environment for meagre growth in output, employment and income despite eased monetary policy by central banks, an analysis by the Economic Commission for Latin America and the Caribbean (ECLAC) has shown.

Service-based economies like the Bahamas, St Lucia and Jamaica are performing worse than goods-producing economies like Belize, Suriname and Trinidad and Tobago.

In a presentation at ECLAC’s offices in Port of Spain, entitled “The Caribbean in the World Economy- Context and Insights” earlier this week Prof Dillo Alleyne, economics development officer and officer-in-charge of ECLAC’s sub-regional headquarters for the Caribbean, said the issues faced by Caribbean economies were only emphasised by the current global economic crisis, and will persist even when the crisis is over unless fiscal policies are put in place to deal with them.

He said there were two important phenomena impacting on the Caribbean even if the world economy were to right itself: an emerging fiscal crisis due to rising debt, deficits and reduced capacity by governments to undertake countercyclical policy and provide social protection, and intense reliance on primary commodities, with all the fluctuations for demand and volatility of prices. The report estimates that average growth for the region will drop to 3.7 per cent in 2012, compared to 4.3 per cent this year.

Although growth had already slowed down from 5.9 per cent in 2010, the report states that most of the region showed “a positive performance thanks to a favourable external situation.” However, an increase in volatility and uncertainty during the second half of the year significantly complicated the global economic environment.

In particular, the report points to the current state of the Euro as a key factor that could contribute to economic uncertainty in the region.

“There is a great possibility of a deep crisis in the Eurozone, which would significantly affect the global economy overall and would impact our region primarily through the real channel exports, prices, foreign investment, remittances and tourism and the financial channel, greater volatility, possible capital outflows and difficulties in accessing credit,” said Alicia Brcena, Executive Secretary of ECLAC, while presenting the report.

The report also stresses that future growth will be intricately tied to the economic performance of developed countries, and a drop in their level of activities would result in a fall in demand for goods, negatively affecting regional exports and the prices of principal export products.

The region’s high level of reserves and low levels of public debt except for a few Caribbean countries are strengths that would enable it to better face the economic downturn next year, says the report.

The reserves would allow countries to finance a deficit in the current account, and the relatively low debt would make room for countercyclical fiscal policies, allowing an expansionary monetary policy.

However, not all countries face the same economic or political circumstances. In many States, there are fewer arenas for anti-crisis policies than before the crisis three years ago, and measures would not be as powerful as they were then, according to the report.

ECLAC underscored that some of the principal challenges for Latin American and Caribbean economic policy include preparing for an eventual deterioration of the international situation as a whole, taking into account the possibility of sudden changes and the delay in the impact of macroeconomic policies, designing a fiscal policy package and ensuring it is financed for easy implementation, and protecting jobs and the most vulnerable social sectors.