Oct 2016 Financial News

World Bank says C'bean showing signs of economic recovery

Oct 07, 2016

United States (CMC) — The World Bank says Latin America and Caribbean countries are showing signs of economic recovery and an increased volume of exports, including new products in higher quality niches.

According to the new semi-annual World Bank report on Latin America and the Caribbean, “The Big Switch: Restoring Growth through Trade,” while the region is expected to record economic contraction of 1.1 per cent in 2016 it will recover to 1.8 per cent in 2017.

It said the recovery is attributed largely to a rebound in South America, where growth is expected to reach 1.5 per cent in 2017.

The report notes that Mexico, Central America and the Caribbean as a sub-region, which depend less on commodity exports and are more closely tied to the economic recovery in the United States, are expected to remain in positive territory this year and 2017 at 2.4 and 2.7 per cent, respectively.

“The regional slowdown seems to finally be coming to an end, with average growth expected to turn positive in 2017,” said Augusto de la Torre, World Bank chief economist for Latin America and the Caribbean.

“Now, we are emphasising the need for a major switch of resources, workers, capital, entrepreneurial talent, financing towards the production of goods and services that are traded in international markets, that is, towards tradable activities,” he added.

The report notes that in the new reality of lower commodity prices, the region can no longer depend on domestic demand to boost growth, as it did during the bonanza years.

“A turn toward outside buyers will be crucial to boost economic activity. However, just when the region seems ready to make the necessary efforts to strengthen its presence in international markets, the world seems to be going in the opposite direction, as the volume of global trade is flattening if not declining, pulled down by a contraction in the volume of imports from China and East Asia, more broadly,” the World Bank noted.

But it said the good news is that some preliminary evidence now shows that countries in the region are already increasing production of exports including new, higher quality products that are finding niche markets in the US and Europe.

Moreover, the Washington-based financial institution said more competitive exchange rates, obtained during the adjustment of the past two years, “open the space for greater regional trade by replacing imports from outside the region with products and services efficiently produced within the region”.

The report also notes that countries with a flexible exchange rate are diversifying their exports and export destinations.

“One question is whether the structural transformation required to make this shift in production is consistent with the process of macroeconomic adjustments that is still under way in many countries in order to adapt to the new post-boom reality,” De la Torre said.

“To sustain growth, the adjustment process should avoid unduly sacrificing investment, so crucial to boost future growth,” he added.

De la Torre said that reigning on fiscal expenditures has proven to be a tough challenge for many countries.

Source:
Jamaica Observer
Friday October 7, 2016

http://www.jamaicaobserver.com/news/World-Bank-says-C-bean-showing-signs-of-economic-recovery