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February 12, 2008: In an interview given to Mr.
Michael Christie, Reuters Bureau Chief for Southeastern U.S.
and the Caribbean., Murilo Portugal, Deputy Managing
Director International Monetary Fund expressed the belief
that the slowing down in the US economy will cause a
slowdown in the Eastern Caribbean. He expressed
concern that the small open island economies are not only
vulnerable to weather shocks and natural disasters but also
to important changes in the international economy that could
affect tourism; an industry that accounts for three fifths
of the exports of the ECCU (Eastern Caribbean Currency
Union) countries. "Just to give you some figures: the ECCU
(Eastern Caribbean Currency Union) region grew in 2006 by
5.9 percent and in 2007 by 4.1 percent. And we are
projecting for 2008 an average growth for the ECCU region of
3.3 percent." Portugal said.
Portugal is planning to visit the region to address the
Finance Ministers of the ECCU; Anguilla's Finance Minister
the Honourable Victor Banks, currently chairs the monetary
council of the Eastern Caribbean Central Bank (ECCB). He
said his objective in visiting the Eastern Caribbean is to
discuss the international situation and how that situation
could affect the region.
The IMF Deputy Managing Director is recommending a
process of fiscal consolidation for the islands including,
broadening of tax bases, introducing value-added
taxes, and trying to improve the overall fiscal situation
due to the high levels of debt . He added, "If you compare
internationally, the average level of public debt in the
region is 102 percent of GDP at the end of last year, which
is really a quite high figure. So, they need to do more. All
these economies share a quasi currency board arrangement, so
they have a common exchange rate which is maintained at a
fixed relation with the US, which means that the main
instruments that they have are fiscal policy and structural
policies. So, they need to continue with the fiscal process
that they have started and also to speed up and to deepen
the process of regional integration. But of course, in a
way, this financial turmoil has positive and negative
aspects. One aspect is that because the EC dollar is linked
to the US dollar, it's also depreciating in real terms, and
that is boosting the competitiveness of their exports, and
they can still be quite competitive in relation to Europe
and in relation to other areas in the world." |
