Developments and Challenges in the Caribbean Region (Occasional Paper #201)

Economic growth in the Caribbean region is expected to accelerate over the medium term, averaging about 3.5 percent a year during 2000–05, compared with 2.6 percent during 1990–99, according to a new study by the International Monetary Fund. The inflation differential with the United States is also expected to narrow, resulting in some gains in competitiveness for the region. However, Caribbean countries face several tough challenges, as their preferential trade arrangements with industrial countries are likely to be progressively eroded and concessional assistance will become more difficult to attract, according to the study entitled Developments and Challenges in the Caribbean Region, published as Occasional Paper 201. A slowing U.S. economy could also adversely affect the region’s foreign currency earnings. Caribbean states, grouped in the Caribbean Community known as CARICOM, will therefore need to take a number of measures to preserve economic gains made over the past two decades, the authors argue. The authors note that progress toward achieving the goal of a single market economy in the Caribbean region has been slow, but some success has been achieving in harmonizing domestic tax regimes.