Tourism Weakness Will Drag On Regional Economic Growth

BMI View: We expect that tourism industr y growth throughout the Caribbean, traditionally a key driver of economic activity, will continue to slow in the years ahead, keeping real GDP growth relatively subdued. Moreover, while we expect some countries to outperform, weak fiscal revenues and higher borrowing costs will limit the capacity of most governments in the region to reverse the trend in slower growth.

W hile undoubtedly in better shape than during and after the 2008-2009 global financial crisis, w e expect that the next several years will see sustained weakness in Caribbean economies' tourism industries, compounding an already weak outlook for real GDP growth in the region . We believe that lower trending growth in the tourism sector - particularly in international tourism receipts and hotel and restaurant industry value - weigh on economic growth in the region over the next several years . Slower growth in receipts and industry value means that less tax revenues will are generated, fewer jobs are created , weighing on private consumption, and that there is less need for fixed investment.

The opposite of this was on display in the late 1990s and mid-2000s, when a sustained surge in tourism receipts and industry value helped propel regional GDP growth. But rather than the average regional real GDP growth of 3.9% in 1999-2000 and then 4.9% from 2003-2007, when receipts and industry value grew rapidly, we forecast weakness in the tourism sector will keep regional GDP growth contained to a more moderate 2.6% from 2013-2015, with risks likely weighted to the downside.

GDP Growth Tied To Tourism
Caribbean - Real GDP & Tourism Industry Growth

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This article is tagged to:
Sector: Country Risk, Tourism
Geography: Caribbean, Caribbean, Caribbean, Caribbean

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