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Barbados, Guyana and Jamaica Business Forecast Report Q1 2015

  • November 2014
  • -
  • Business Monitor International
  • -
  • 43 pages

Core Views

We believe that most of the English-speaking Caribbean will continue to see a modest economic recovery in the coming quarters as the US growth story begins to gain ground. That said, even with a modest acceleration in growth, those countries most reliant on tourism and financial services will continue to struggle, as we expect these
industries are unlikely to return to pre-crisis levels in the foreseeable future. Indeed, while we expect that lower precious metals prices will prompt a weakening macroeconomic outlook for the region's miners, growth will still be stronger than in the predominantly tourism-driven countries.
C aribbean economies will continue to face economic headwinds in the coming years in light of rising debt burdens, fixed exchange rate regimes, and modest growth prospects. These factors, combined with our view that neither the tourism nor financial services sectors will see a significant recovery in the next few years, mean that we
do not rule out additional credit events or major balance of payments corrections in some of the small island economies. Should the Venezuelan government significantly alter the terms of its Petrocaribe programme, which provides subsidised oil imports to many Caribbean economies, it could send import bills much higher and potentially cause some countries to default on their outstanding oil loans.

Major Forecast Changes

We forecast real GDP growth in Jamaica to grow from 0.6% in 2013 to 1.6% in 2014 and 1.9% in 2015. This is a slight upgrade to our previous projections that indicated that real GDP would expand by 1.5% in 2014 and 1.8% in 2015. An uptick in fixed investment will be the main driver of stronger economic growth.

Table Of Contents

Barbados, Guyana and Jamaica Business Forecast Report Q1 2015
Regional Executive Summary 13
Core Views 13
Major Forecast Changes 13
Key Risk To Outlook 13
Chapter 1.1: Political Outlook - Barbados 15
Long-Term Political Outlook 15
Social Stability And Drug Trafficking Greatest Challenges To Political Stability 15
Well-established democratic institutions, strong policy continuity and limited external threats will maintain broad political stability in
Barbados over the coming decade. The greatest challenges over the next 10 years will be social stability, as fiscal austerity foments
social unrest, and the continued rise of drug trafficking in the Caribbean region.
Chapter 1.2: Economic Outlook - Barbados 17
Economic Activity 17
Fiscal Austerity To Keep Growth Subdued 17
Barbadian real GDP growth will return to positive territory in 2015, after a contraction in 2014. That said, the acceleration in growth will
be tepid, with fiscal austerity measures set to keep economic activity subdued in the next few years.
Chapter 1.3: 10-Year Forecast - Barbados 19
The Barbadian Economy To 2023 19
A Decade Of Weak Growth Ahead 19
Barbados will struggle with slow growth, a wide current account deficit and weak government fiscal dynamics over our 10-year forecast
period. While not part of our core forecast, we see downside risks that could threaten the stability of the currency peg to the US dollar or
lead to a fiscal or debt crisis over the next decade.
Table: Long-Term Macroeconomic Forecasts 19
Chapter 2.1: Political Outlook - Guyana 23
Long-Term Political Outlook 23
Social Challenges and Security Threats Weigh On Outlook 23
Guyana will face a number of significant social obstacles over the course of our 10-year forecast period, such as ethnic tensions,
policymaking deadlock and high levels of poverty. This will only be exacerbated by the rising presence of narcotraffickers, such that we
rank the country as having one of the most challenging long-term political outlooks in the Caribbean region.
Chapter 2.2: Economic Outlook - Guyana 25
Economic Activity 25
Labour Market Dynamics To Exacerbate Slowing Growth Story 25
Guyana's small labour force and inadequate pool of skilled workers will weigh on the country's attractiveness as an investment
destination. Over the coming decade, the country's weak labour market dynamics will contribute to weaker growth as well as creating
the conditions for increased social unrest.
Chapter 2.3: 10-Year Forecasts - Guyana 29
The Guyanese Economy To 2023 29
A More Difficult Decade For Growth 29
In the coming decade, Guyana will face broad-based macroeconomic deterioration with weaker growth, widening current account
deficits and rising fiscal account shortfalls. Indeed, with lower gold prices weighing on mining production, and limited opportunity for
services sector expansion, we believe that those economic drivers that had buffered Guyana during the financial crisis will no longer
support growth to the same extent.
Table: Long-Term Macroeconomic Forecasts 29
Chapter 3.1: Political Outlook - Jamaica 33
Domestic Politics 33
Social Challenges To Foment Most Pressing Political Risks 33
We expect that general agreement among Jamaica's political leaders regarding policy direction will promote political stability over the
coming years. However, domestic challenges, including crime, unemployment, and fiscal strain which will weigh on the provision of
public services, will create other sources of political risk.
Chapter 3.2: Economic Outlook - Jamaica 37
Investment Climate 37
Crime To Remain A Persistent Threat 37
While Jamaica has taken a number of steps to increase police efficiency and accountability, criminality in the country will remain high.
Indeed, the country faces a high poverty rate, substantial youth unemployment and a rising number of drug traffickers utilising the
country as a transit point to ship drugs from the Andean region to the US - all of which will contribute to higher crime rates.
Chapter 3.3: 10-Year Forecasts - Guyana 39
The Jamaican Economy To 2023 39
Government Reforms To Support Stronger Growth 39
Under the guidance of the IMF, the Jamaican economy will begin to consistently post positive growth figures over the coming decade.
Fiscal adjustments, tax reform, and improvements in external account dynamics will all help to support economic activity.
Table: Long-Term Macroeconomic Forecasts 39
Table: Simplification A Major Theme Of Tax Overhaul 40
Chapter 4: BMI Global Assumptions 43
Global Outlook 43
Reality Check: Uncertainty Reigns 43
Table: Global Assumptions 43
Table: Developed States, Real GDP GrowtH, % 44
Table: Emerging Markets, Real GDP Growth, % 45

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