Standard & Poor says debt on rise in Caribbean
A major rating agency says the global financial crisis has had a big impact in the tourism-dependent Caribbean.
Standard & Poor’s says in a new report on the Caribbean that economic growth and foreign direct investment has slowed while public debt has increased. It says external public-sector debt for the region rose to 29 per cent of gross domestic product last year, up from 20 per cent in 2008.
Caribbean governments increased public-sector debt sharply in response to the financial crisis, to 57 per cent of GDP by the end of 2011, according to the ratings agency.
The rating agency’s report also says that Caribbean countries are more vulnerable to external shocks due to low savings rates, persistent account deficits and a high reliance on outside financing.
The debt ratio is over 100 per cent in countries like Jamaica, St Kitts & Nevis, Grenada and Barbados. Several countries have arrangements with the International Monetary Fund to provide economic stability.
In another report, S&P said the Caribbean is in the difficult position of relying on US and European economic growth.
“The sluggish recovery in the US owing to a still highly indebted consumer and high unemployment, and a recession in Europe have held back external demand.”
Many countries in the Caribbean attempted expansionary fiscal policy to fight the 2008-2009 global recession but ended up increasing debt and not achieving a turnaround in GDP.
“We estimate that net general government debt in the Caribbean reached an estimated 45 per cent of GDP in 2011, up from about 30 per cent pre-crisis,” said the rating agency. “The Caribbean’s now higher debt levels — projected to remain above 40 per cent of GDP — are hard to manage, given the absence of monetary and exchange rate policy flexibility and more subdued growth prospects.”