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West Caribbean Business Forecast Report Q3 2014

  • May 2014
  • -
  • Business Monitor International
  • -
  • 38 pages

Core Views

We believe rising gold production, an improving tourism sector, and strong private consumption levels will continue to drive robust real GDP growth rates in the Dominican Republic in the coming years. We expect Puerto Rico to remain in a recession through Fiscal Year 2015 amid high unemployment, depressed private consumption, and
fiscal austerity. We see rising security risks in the Dominican Republic, Puerto Rico, and Jamaica, due to a greater incursion of organised crime.

Major Forecast Changes

No major forecast changes.

Table Of Contents

West Caribbean Business Forecast Report Q3 2014
Composite Rating .5
BMI Risk Ratings - Dominican Republic 6
BMI Risk Ratings - Jamaica ..7
BMI Risk Ratings - Puerto Rico ..8
BMI Ratings - West Caribbean Tables 9
Caribbean SWOTS .. 10
Executive Summary .. 13
Core Views 13
Major Forecast Changes ..13
Key Risk To Outlook ..13
Chapter 1.1: Political Outlook - Dominican Republic .. 15
Domestic Politics . 15
Security Risks Will Remain High Due To Expanding Organised Crime ..15
We expect a weak security environment to remain a main risk for investment into the Dominican Republic over the next few years due to
an increasing prevalence of organised crime. Sectors that have seen significant investment and have expanded rapidly in recent years,
such as mining, will be at high risk of extortion and illegal resource tapping.
Chapter 1.2: Economic Outlook - Dominican Republic . 17
Economic Activity . 17
Export-Driven Growth To Continue In 2014 and 2015 .17
We expect the gold exports boom in the Dominican Republic to continue driving robust real GDP growth in the next few years, given
the early stages of production in the Pueblo Viejo mine. In addition, an improving outlook for the tourism sector will contribute to lower
unemployment and support stronger household spending in the coming years.
Table: Macroeconomic Forecasts 17
Chapter 2.1: Political Outlook - Puerto Rico . 19
Domestic Politics . 19
Next Government Likely To Shift To Expansionary Fiscal Policies ..19
The aggressive austerity measures implemented by Puerto Rico's Governor Alejandro García Padilla to avoid debt restructuring
increase the likelihood that the next government will shift to more expansive fiscal policies to regain popular support. More expansive
policies in the next administration would re-surface concerns over the sustainability of Puerto Rico's debt position.
Chapter 2.2: Economic Outlook - Puerto Rico . 21
Economic Activity 21
Recession To Remain As Consumption Continues To Weaken ..21
We expect recessionary conditions in Puerto Rico to prevail through fiscal year 2015 at least, as declining household spending, driven
by weak labour market dynamics, will continue to weigh on overall economic activity. In addition, as the government attempts to improve
a precarious debt position, fiscal pressures will drive authorities to cut back on spending, further hampering private consumption.
Table: Macroeconomic Forecasts 21
Chapter 3.1: Political Outlook - Jamaica . 23
Domestic Politics . 23
Security To Remain Central Risk, Despite Recent Reforms ..23
While the Jamaican government has made significant progress in enacting tax reforms and improving the business environment, the
high crime rate will remain a serious drawback for would-be investors. Regional dynamics, particularly the rising activity of violent drug
cartels in the Caribbean, will keep crime on centre stage for the foreseeable future, although recent moves to improve the efficiency and
accountability of the police force may help ameliorate the problem and improve investor sentiment.
Chapter 3.2: Economic Outlook - Jamaica . 25
Economic Activity 25
2014/15 Budget To Support Fiscal Discipline ..25
The Jamaican government has presented the budget for the 2014/15 fiscal year ending in March, which is in line with its obligations
under an IMF agreement to rein in spending and bolster its ability to pay down its debts. The budget is more heavily orientated towards
capital expenditures, which if realised will help boost the country's extremely sluggish economy.
Table: Macroeconomic Forecasts 25
Chapter 4: Regional
Regional Outlook I 27
Economic Citizenship Programmes No Silver Bullet .27
We do not rule out a further increase in 'economic citizenship' programmes, by which foreigners can gain citizenship in exchange for
a substantial investment sum, in the Caribbean in the coming years. While these initiatives may provide some short-term relief from
tight budgetary conditions, we do not expect that they will provide a significant boost to real GDP growth or government coffers in the
medium term.
Table: Caribbean Economic Citizenship Programmes 27
Regional Outlook II .. 29
Expansionary Fiscal Policies Could Heighten Credit Risk In ECCU .29
We continue to highlight that the eight countries that make up the East Caribbean Currency Union face an elevate d risk of fiscal
and balance of payment crises in the coming quarters, particularly in light of a recent uptick in government spending. Indeed, should
expansionary fiscal policies continue through 2014, the resulting economic imbalances may necessitate further debt restructurings in the
region.
Chapter 5: Country Summaries . 31
Cuba . 31
Business Environment . 31
Notwithstanding Additional Reforms, Business Climate Remains Poor 31
Table: Macroeconomic Forecasts 31
Bermuda 33
Economic Activity 33
Tourism Uptick To Support GDP Growth In 2014 ..33
Table: Macroeconomic Forecasts 33
Bahamas .. 35
Business Environment . 35
Rising Murder Rate Poses Risk To Tourism Sector 35
table: Macroeconomic Forecasts 35
Chapter 6: BMI Global Assumptions .. 37
Global Outlook . 37
Growth Increasingly Polarised ..37
Table: Global Assumptions ..37
Table: Deve loped States , Real GDP Growt H, % 38
Table: BMI VERSUS BLOO MBERG CONSENSUS REAL GDP GROWTH FORECASTS, % .. 38
Table: Emerging Markets , Real GDP Growth , % ..39

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