World Bank urges Caribbean to ‘propel domestic engines of growth’
From Antigua Observer –CMC
WASHINGTON (CMC) – The World Bank has urged Latin America and the Caribbean (LAC) to “propel domestic engines of growth”, stating that the “formidable global tailwinds” that facilitated robust economic growth and social inclusion in the region over the past decade are receding.
In its latest semiannual report, “Latin America and the Caribbean as Tailwinds Recede: In Search of Higher Growth,” the World Bank’s Office of the Chief Economist for the region, said on Wednesday that a new global context of excess liquidity, slower growth in China, and sluggish economic activity and high public debt in the developed world, points to the need for the region to do more on its own “in order to go back to growth rates similar to those enjoyed in the past decade.”
The Washington-based financial institution said LAC is already expected to grow by 3.5 percent, an improvement from last year’s 3 percent, “but still below the 5 percent average before the 2008/09 crisis or the 6 percent in 2010.”
It said rates range from as low as 0.1 and 1.0 percent for Venezuela and Jamaica respectively, to 6 percent for Peru, nearly 9 percent for Panama, and above 11 percent for Paraguay.
Augusto de la Torre, the World Bank’s chief economist for the region, said while these growth rates are “good,” they are still “insufficient to sustain the recent pace of social progress” that the region experienced in the last decade.
“Accordingly, the policy emphasis is shifting from external to domestic engines of growth, and from macro and financial stability concerns to growth-enhancing reforms,” he said.
De la Torre said as global tailwinds subside, the ability of regional countries to grow above 3.5 percent “depends critically on themselves.”
The report says that answering the question of how can the region propel its domestic engines of growth starts with understanding the specificities of LAC’s growth pattern, its limitations, and its strengths.
It says that while much is said about South East Asia’s growth model – based on manufacturing exports, high savings, and competitive exchange rates – the region’s circumstances “stand already in sharp contrast with that.
According to De la Torre the quest for export competiveness, based on cheap labor and undervalued exchange rates, “looks politically unfeasible and economically suboptimal.
“If competiveness beyond natural resource-intensive goods is to be developed, without sacrificing living standards, productivity is the name of the game,” he said.
The World Bank’s chief economist for the region noted that achievements in the 2000s have been “significant, including macroeconomic stability, solid growth, poverty reduction, and a fairer income distribution.”
But he said the challenge for economic policy going forward is to “preserve and build on past gains, consolidating the dividends of a socially inclusive growth, and doing so without the assistance of global tailwinds.”
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