Nassau, Bahamas – A top official from the International Monetary Fund is predicting the U.S. economic slowdown will also cause a slowdown in Caribbean and Latin American economies.
Murilo Portugal, deputy managing director of the IMF, yesterday said the slowdown here could impact the region`s tourism sector especially in smaller, Caribbean nations and also affect foreign direct investment flows, which are important in the region especially in the construction industry.
Portugal added that because the Eastern Caribbean dollar is linked to the US dollar, it`s also `depreciating in real terms.`
`Important changes in the international economy could affect tourism,` said the IMF official, adding that the region is also vulnerable to weather shocks and to natural disasters.
He recommends that Caribbean governments broaden their tax base by introducing value-added taxes and trying to improve the overall fiscal situation since the levels of debt are still high. Portugal, who is on a five-day visit to the Caribbean, however, added that the global economic effect `would be more on the real side rather than on the financial side, because their financial systems are not so much interlinked with the international financial system.`
Tourism accounts for three-fifths of the exports of the Eastern Caribbean countries. The Eastern Caribbean Currency Union (ECCU) region grew in 2006 by 5.9 percent and in 2007 by 4.1 percent. But Portugal said the Fund is now projecting an average growth for the ECCU region of only 3.3 percent this year.