by Kari Grenade, PhD, Caribbean Macroeconomic Advisor
The International Monetary Fund (IMF) released its flagship World Economic Outlook (WEO) on 22 October 2024.
Some key messages are
- the global economy has remained resilient, but medium-term growth prospects are weak
- inflation has descended significantly
- global public debt is substantially elevated
- macroeconomic risks are many and tilted to the downside, and
- appropriate policies are required to boost growth and reduce indebtedness
The global economy has remained resilient throughout a particularly rough period in the past 2 years. Average global economic growth is projected at 3.2% this year and next year. Average growth in Advanced Economies such as the USA, Canada, Japan, the UK, and the Euro Area is forecasted to pick up slightly, estimated at 1.8% this year relative to 1.7% last year, underpinned by growth in the USA, forecasted at 2.8%. In Emerging Market and Developing Economies (EMDEs), which include China, India, Brazil, Mexico, South Africa, and 151 other countries, average growth is projected at 4.2% this year, a slowdown relative to the average of 4.4% in 2023. Of the major EMDEs, India leads the pack, with an estimated economic expansion of 7%, followed by China at 4.8%. Region-and-country-specific factors underpin the various forecasts, but in general, key factors restraining faster global growth include low productivity as well as production and supply disruptions caused by climate shocks and geopolitical conflicts.
The prospects for global growth over the medium term (next 5 years) are weak, projected to average 3.1%, the lowest average in 3 decades, largely reflecting lackluster prospects for China and other regions, including Latin America and the European Union. The medium-term growth projection is subject to several downside risks including the possibility of commodity price shocks amid rising geopolitical conflicts and climatic events.
The IMF estimates global headline inflation at 5.8% this year, a welcomed descent from its peak of 9.4% in the third quarter of 2022, reflecting the successful efforts of global central banks in the past 2 years to tame inflation by raising interest rates. Meanwhile, global public debt is at an all-time high, estimated to exceed 93% of global GDP this year, well above the pre-pandemic average. The October 2024 WEO can be accessed here.
Turning to the Caribbean, the average economic growth of the 14 independent members of Caricom is estimated to be 5.9% this year, an acceleration relative to the 5.1% average in 2023. At the individual country level, the Guyanese economy, which has grown threefold since the start of oil extraction in 2019, is forecasted to expand at the fastest pace this year, estimated at 43.8%. The Jamaican economy will register the slowest rate of growth, estimated at 1.3%. The growth forecasts for the other countries are as follows; Antigua & Barbuda (5.8%), The Bahamas (1.9%), Barbados (3.9%), Belize (5.4%), Dominica (4.6%), Grenada (3.0%), St Kitts and Nevis (4.3%), St Lucia (3.9%), St Vincent and the Grenadines (4.5%), Suriname (3.0%), and Trinidad and Tobago (1.6%). Relatively strong performances of the tourism sector, the non-energy and energy sectors (in Trinidad and Tobago), and commodities (in Suriname) largely explain the respective growth forecasts. An economic decline of 4% is projected for Haiti, reflecting the country’s ongoing security and governance challenges.
Indeed, Caribbean economies have been resilient despite the unprecedented and overlapping shocks faced since 2020. If the regional growth estimates are realised, they will augur well for public revenues, job creation, investment, consumption, and more broadly, the living standards of Caricom citizens, at least in the short term. Moreover, falling global interest rates and inflation also bode well for Caribbean economies. Based on the IMF’s estimates, the average headline inflation rate in Caricom will moderate to 5.7% this year, from a high of 10.4% last year.
Average regional growth is projected at 3.8% in 2025 and is subject to setbacks amid rising economic uncertainties, a major one being the outcome of the upcoming general elections in the USA, which can have significant global implications, with spillovers to the Caribbean. Should Kamala Harris ascend to the presidency, the Caribbean can be cautiously optimistic about the continuation of policies, some of which benefit the region, such as having a powerful ally in the fight against some of the world’s most acute challenges, including climate change. Cautiously optimistic, but not naïve, the Caribbean would be wise not to expect any special treatment and favours notwithstanding the Caribbean lineage of Madam Harris. Should Donald Trump ascend to the presidency, there could be a discontinuation of some policies, for example on climate change, international trade, and immigration, with potentially adverse effects on Caribbean economies. Heightened economic uncertainties necessitate strengthened risk management systems and risk-informed strategies in both the public and private sectors.
