Outlook for 2011-12

Although the countries of the Caribbean Community (Caricom) will continue to enjoy broad political stability in the outlook period, there is a risk of increased unrest as most countries struggle to return to positive economic growth following deep recessions and high unemployment in 2009-10. Earnings from the tourism sector, the region's main source of employment and foreign exchange, will recover modestly in the outlook period as economic growth in the US and UK slowly improves. However, as governments attempt to deal with continuing fiscal constraints amid rising levels of public debt, inequality and poverty levels will increase, reversing much of the progress made in the past decade. Nonetheless, the Economist Intelligence Unit does not expect rising discontent to threaten the region's long democratic tradition. Throughout the region, the illegal drug trade will continue to represent a threat to security and stability. The public finances will remain under pressure in most countries during the outlook period, owing to weak revenue collection. Extremely high levels of public debt will continue to threaten fiscal sustainability in an economic environment characterised by still-tight liquidity.

Recent developments

Caricom is facing some of its most serious financial challenges to date, raising concerns that the commitment of Caricom's 14 member states to regional integration could falter. The need for renewed cost-cutting comes at a time when the Secretariat is seeking a new leader following the resignation of the secretary-general, Edwin Carrington-who served in the post for nearly two decades-at the end of 2010. A deal that will substantially increase competition for Caribbean bananas in the EU was finalised on February 3rd when the European parliament approved an agreement-first reached in December 2009 between the EU and the US, Brazil, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Peru and Venezuela-which reduces import duties on bananas produced in Latin America by 35% over six years. Following an extremely challenging period for the region's key tourism sector in the wake of the global financial crisis-which resulted in sharp reduction in arrivals and spending from crucial markets such as the US and UK-there were continuing signs of a tepid recovery in most countries in the first nine months of 2010 (the latest period for which data are available).