What’s in store for 2010

08.Jan.10

Editor: Politically, socially and economically, the year 2010 promises to be a very interesting one in the history of this country.

A pending budget, possible election, further decline in economic output will make 2010 as interesting as 2009.{{more}}

The past year was a challenging one for this country. Declining tourism revenue, remittances (US$31 million in 2007 & 08) and banana exports have affected government’s revenue to meet its recurrent expenditure and service its national debt.

Remittances to the Latin America and the Caribbean is forecast to decline by 7% in 2009.

The world economy is slowly recovering from the global recession, but the post crisis recovery will take some time to impact on Caribbean economies as Americans and European regain their confidence to spend and travel again.

Early in the new year, the government will be presenting its budget for the financial year. The nature of the budget will indicate the intention and direction of the government in an election year.

On the capital side, strong emphasis may be placed on constructing feeder or guti-track roads and creating temporary employment such as road gangs.

The pursuance of an expansionary budget may involve further government borrowing. Given the high debt burden and GDP to debt ratio (70%) , the cost of borrowing will inevitably be high or moreso difficult to obtain on the regionally and international on the capital market.

Contrary to the above, greater fiscal prudence may have to be observed, given the dire straits of most Caribbean economies, St.Vincent being no exception.

The banana industry may face a further reduction in output from the threat of the Black Sigatoka Disease, further affecting output and revenue earnings in this industry. The European Union cutting its current most-favoured-nation tariff on bananas may possibly be the death knell of the banana industry in the Windward Islands.

The post crisis recovery of the global economy will witness an increase in demand for commodities including oil. The low level of investment in refining capacity in the major industrial economies may force up price beyond $US100 a barrel, reversing early improvements in global economic growth. Inflation levels may thus rise in this country in 2010.

Many former bashers of the International Monetary Fund (IMF) over its Structural Adjustment Programmes may have to swallow their pride and go knocking on the doors of that institution.

St.Vincent and the Grenadines and Dominica have already drawn down US$ 5.7 and 5.1 million, respectively, under the International Monetary Fund Rapid-Access Component of the Exogenous Shocks Facility.

Many Caribbean countries, including St.Vincent, may have to follow Jamaica and seek further assistance from the International Monetary Fund. Jamaica is in discussion with the IMF for a bridging loan of US1.2 billion stand by facility to shore up its exchange reserves and budgetary support. Can the government afford to go to the IMF before or more after an election?

Being an election year, election fever will ever be present, as Vincentians may have to make the crucial decision in deciding who best can lead them out of this economic downturn and take the country forward.

High unemployment, crime and drugs will all be at the forefront in any election debate.

The growing informal economy can expect to grow further as public employment dries up in light of the current economic climate.

An unemployment rate estimated around 20 percent and an informal economy of 1085 street vendors in Kingstown may only increase, giving rise to obstruction of walkways. However, these street vendors cannot be touched in an election year.

The direction of our foreign policy will also be part of any election debate in 2010. The diversification of our foreign policy from our traditional allies (Britain, United States and Canada) will be the subject of debate among Vincentians as we forge greater ties with Iran, Brazil, India, Venezuela, Cuba, Nicaragua and Bolivia.

The United States will inevitably be looking closely at our links with some of those countries, two of which are facing an American embargo.

The upcoming election will thus be viewed with some interest by the United States State Department and may thus have an interest in trying to influence its outcome.

As a people and a nation, 2010 may pose many challenges but with a collective spirit and will. What appears as inevitable may just turn out to be the improbable.

Nilio Gumbs