Venner urges Eastern Caribbean economies to operate collectively as a market

In order for the economies of the Eastern Caribbean to recover from the global economic crisis, they will have to develop several sectors and operate collectively as a market.{{more}}

Governor of the ECCB Sir Dwight Venner expressed this view during the Eastern Caribbean Central Bank (ECCB) Economic Review of 2010, given on Thursday, January 21, 2011.

Venner stated that the performance of the Eastern Caribbean economies must be seen against the backdrop of two main factors. The two factors he stated were the global financial and economic crisis, which began in 2007 and the structure of our economies.

Adding that the countries of the Eastern Caribbean are relatively small, Venner explained that collectively, the countries which make up the currency union have a population of 620,000, a land area of 1,164 square miles and a Gross Domestic Product (GDP) of 5.9 billion in 2010.

“Our economies consequently, are extremely open and vulnerable to external shocks and natural disasters. They also have a very narrow natural resource base and limited human and financial resources,” Venner said.

Venner explained that the Eastern Caribbean Currency Union (ECCU) economy started to feel the effect of the economic crisis in 2009 and 2010, contracting by 7.0 per cent in 2009 and 3.2 per cent in 2010. The effects were reflected in the decline in the construction and tourism industries, with the construction industry, which Venner referred to as a key productive sector, contracting by 21.8 per cent in 2010 “due to the limited availability of foreign financing and reduced inflows of foreign direct investment.”

Venner also explained that there were contractions in the economic activity reflected in the decline in the currency in circulation, which fell by 12.4 per cent in 2010, following a 4.9 per cent decrease in 2009.

“Domestic credit declined by 2.2 per cent in 2010, in contrast to an increase of 4.8 per cent in 2009. On the fiscal accounts, government revenues declined by 35.6 million dollars in 2010, compared with a decrease of 282.5 million dollars in 2009; while a fiscal deficit of 335 million dollars was recorded in 2010, compared with a 780 million dollar deficit in 2009,” Venner added.

Venner stated that for the small countries with economic structures that are externally oriented, the effects of the economic crisis present major challenges to “restructure and realign production and consumption patterns, in order to be more resilient and internationally competitive.”

The challenge in the short run, Venner said, was for the countries to strengthen fiscal and financial stability and in the medium term to effect a transformation of the economies that would lead to higher and sustainable rates of growth.

Venner concluded that the Eastern Caribbean Currency Union (ECCU) must develop diversified, productive and internationally competitive economies which can be successfully integrated into the global economic system.

Venner also mentioned a few factors which are fundamental to the progress of the ECCU. These factors include an emphasis on justice and the law to improve civil society, a cost effective, efficient intra-regional transportation system to facilitate and ensure the success of the Economic Union and a transformation of the tourism sector to be the lead transformative sector.(OS)