Worst of international financial crisis has passed – Bergsten

The Caribbean region must look beyond traditional markets if the benefits of the global economic recovery are to be felt sooner than later, says Dr C. Fred Bergsten, co-founder and director emeritus of the internationally acclaimed Petersen Institute.{{more}}

Bergsten was speaking last week at the region’s first ever Caribbean Economic Forum that was held at the Central Bank of Barbados, in Bridgetown, where the distinguished fellow is currently on a six-week sabbatical, and guest of the country’s Central Bank and its governor Dr DeLisle Worrell.

The economist said that the worst of the international financial crisis has passed, and that the world economy is picking up in 2014 from where it was in the last two or three years, and he thinks that outlook is likely to continue for the next two or three years.

“Over the last several years there has been a prolonged recovery from the global recession that I think has now run its course, and we are moving into higher gear across the world,” Bergsten explained to moderator Julian Rogers, during the live broadcast.

“There are exceptions, but in general the pick-up is now accelerating, in particular the big crisis risks, I think, are behind us. There have been fears that the Euro would collapse, the Euro zone would break up, defaults will ensue in Europe, countries might even exit the Euro zone.

“That fear which was the major overriding risk to the world economy has now essentially disappeared.

“In the United States there were big questions as to whether the recovery was sustainable, whether we will fall back into a new recession. There were fears that Congress might not actually fund the budget at all, might not permit an increase in the US debt ceiling, and cause a dollar crisis. Those fears are now behind us.

“Japan, which has been a drag on the world economy for the past 20 years, is now carrying out a bold new economic expansion policy… I think it puts Japan, still the fourth largest economy in the world, on a much better path.”

Bergsten said that the crisis, which started in the United States in 2008, then transferred to Europe, has recovered slowly, and has taken some time to return to a stable position.

According to Bergsten, historical studies show that on average it takes five to ten years to come out of a financially driven recession.

“Now, all this started in 2008; we’re now six years beyond it. I think the United States has completed its deleveraging process to a large extent, and our private sector is starting to come back. But even when that happens, a lot of caution remains and so the recovery tends to be much more subdued. That historically is the case and that means we can’t expect anything like the boom of the pre-2007 period yet for some time.”

He added that the Caribbean region should do more of what it does best, referring particularly to tourism and in some areas agriculture, as it diversifies to take advantage of the boom of up and coming economies.

He pointed out that more focus should be placed on Asian and Latin American territories, as he predicted that “a tsunami of Chinese tourists” is waiting to venture to new locations, and can make the Caribbean their destination of choice.

Bergsten also pointed to Brazil, one of the world’s fastest growing economies, as a potential tourism market for the region.

Bergsten’s Washington-based Petersen Institute is the major research institution in the United States devoted to international economic issues, and is described as “the most influential think-tank on the planet.”

Following the interview, he fielded questions from local and regional journalists, as well as a studio audience and the general public via emails and live call-ins. Searchlight’s senior reporter Junior Jarvis represented the newspaper at the Barbados event.