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Wednesday, December 12, 2012

ECLAC predicts economic growth for Caribbean in 2013

ECLAC’s executive secretary Alicia Bárcena

SANTIAGO, Chile, Wednesday December 12, 2012 - The Economic Commission for Latin America and the Caribbean (ECLAC) says the region will see stronger economic growth in 2013, despite ongoing uncertainties at the international level, particularly the difficulties faced by Europe, the United States and China.

According to the Preliminary Overview of the Economies of Latin America and the Caribbean 2012 the region will experience economic growth of around 3.8 per cent next year.

ECLAC’s executive secretary Alicia Bárcena said the region will end 2012 with Gross Domestic Product (GDP) growth of 3.1 per cent, “which is higher than the expected figures for world growth (2.2 per cent), but lower than the 4.3 per cent posted in 2011.

“This shows that the world economic crisis had a negative but not dramatic impact on the continent, as the region maintained a certain resilience to external shocks throughout the year,” she said.

ECLAC said that Latin American and Caribbean economies remain largely dependent on world economic trends in 2013 and that the most likely scenario is that slow growth, and even recession in some cases, will continue in Europe during 2013, “although this might also give rise to agreements that could gradually lead to a resolution of the financial, fiscal and competition imbalances that are currently in place”.

The ECLAC document notes that in the United States, the probability of fiscal agreement increased following the recent presidential elections.

It states China could post higher growth rates this year or maintain current levels, depending on the extent to which it manages to boost internal demand and keep inflationary pressure under control, at the same time as recovering export growth.

It is hoped that oil will not become an additional cause of instability for geopolitical reasons, it added.

The overview notes that continuously buoyant internal demand in many of the region's economies will result from improved labour indicators, increased bank credit to the private sector and rising commodity prices that will not fall significantly despite high external uncertainty.

But it warns that Caribbean countries will “remain fiscally fragile, and will require reforms accompanied by external support to ensure sustainable fiscal consolidation trajectories”.

According to Bárcena, the challenge for Latin America and the Caribbean is still to “increase and stabilize investment growth, and not to depend exclusively on consumption as a means of driving structural change with equality, incorporating technical progress and delivering sustainable growth”.

Bárcena said the main impact of the deterioration on Latin America and the Caribbean is in the trade sphere, as growth in the region's export values fell sharply from 23.9 per cent in 2011 to an estimated 1.6 per cent in 2012.

According to ECLAC, Panama will remain the region's fastest growing economy in 2012, followed by Peru 6.2 per cent, Chile 5.5 per cent and Venezuela 5.3 per cent.

It says Paraguay, St. Kitts and Nevis and Jamaica will contract by -1.8 per cent, -0.8 per cent and -0.2 per cent, respectively; while Mexico will grow by 3.8 per cent.

The overview says Central America as a whole will grow by 4.2 percent, South America by 2.7 per cent and the Caribbean by 1.1 per cent.

The study adds that given weakened external demand in the wake of the international crisis, the region's growth is based on expanding internal demand on the back of rising wages and credit, which is partly attributable to monetary or fiscal policy in most countries. (CMC)


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