The Impact of the Global Crisis, the Responses of Caribbean Governments, and the Choices Available to Caribbean Business - PowerPoint PPT Presentation

Loading...

PPT – The Impact of the Global Crisis, the Responses of Caribbean Governments, and the Choices Available to Caribbean Business PowerPoint presentation | free to download - id: 717fde-ZDM0N



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

The Impact of the Global Crisis, the Responses of Caribbean Governments, and the Choices Available to Caribbean Business

Description:

Title: The Impact of the Global Crisis, the Responses of Caribbean Governments, and the Choices Available to Caribbean Business Author: DeLisle Worrell – PowerPoint PPT presentation

Number of Views:46
Avg rating:3.0/5.0
Slides: 17
Provided by: DeLi59
Learn more at: http://www.carib-export.com
Category:

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: The Impact of the Global Crisis, the Responses of Caribbean Governments, and the Choices Available to Caribbean Business


1
The Impact of the Global Crisis, the Responses of
Caribbean Governments, and the Choices Available
to Caribbean Business
  • DeLisle Worrell
  • Caribbean Centre for Money and Finance
  • March 2009

2
I will argue that ..
  • The Caribbean just started to feel the effects of
    the massive global economic hurricane
  • That hurricane strengthened suddenly to Category
    5 in mid-Sept 2008, it continues to rage, and the
    end is not yet in sight
  • Caribbean govts are trying to cope with the
    impact, within their means
  • Caribbean business should be in hurricane
    protection mode, until the storm is over, and we
    can assess the damage

3
In Sept 2008 a manageable financial crisis became
an uncontrolled economic disaster
  • By mid-2008 the world financial system was in
    deep crisis, but the real economy appeared sound
  • On Sept 15, Lehman Bros was allowed to fail
  • That triggered calls on guarantees by AIG of
    securities issued by Lehman
  • US govt forced to lend to prevent AIGs collapse
  • Seniority of US govt loan depressed AIGs shares
    by 40 overnight, triggering world-wide
    depression
  • Johnson (2009)

4
How the outlook has worsened since Sept 2008
  • World economy expected to grow by lt 1 now
    expected to contract by 2 3
  • US job losses lt 1 million now approaching 3
    million
  • US economy expected to recover in 2nd ½ of 2009
    now nobody knows
  • Companies with moderate leverage and good
    liquidity expected to manage on their own now
    even the most conservative need govt assistance

5
Impact on the Caribbean to Date
  • Tourist arrivals below comparable period one year
    earlier since Q4 of 2008
  • A major regional financial conglomerate a small
    Antiguan bank have been intervened
  • The Jamaican exchange rate depreciated about 20
  • Regional stock exchange indices fell drastically,
    but they are small
  • However, foreign exchange reserves did not decline

6
Worse is expected
  • Most Caribbean economies are expected to contract
    in 2009
  • In the exceptional cases where growth is
    expected, it will be slower than in 2008
  • Demand for tourism, manufactures and mineral
    exports expected to fall
  • FDI and foreign borrowing will be lower than in
    2008
  • Unemployment rates to increase
  • Foreign exchange reserves expected to decline

7
It could be much worse if recovery in North
America and Europe is delayed
  • Monetary policy has been taken to the limit in
    the US, UK and Japan, with no effect
  • While it is essential to prevent financial
    systems from collapsing, cash injections to the
    financial system will have no impact on credit,
    because there is no demand for credit from
    households (whose jobs are at risk) or businesses
    (whose markets are collapsing)

8
The uncertain outlook for North America and
Europe, continued
  • The expenditures on job creation have so far
    resulted in few new permanent jobs, compared to
    the rate at which jobs are being lost, so
    economies remain in a downward spiral
  • Knowledgeable estimates suggest that the fiscal
    stimuli so far announced are significantly less
    than required (businesses and households are
    attempting to save more than the amount that
    govts intend to spend, so total spending will
    continue to fall)
  • As of today, things are still getting worse

9
There is insufficient information about major
sources of risk to the Caribbean financial sector
  • Risks arising from difficulties experienced by
    foreign owners (AIG, Stanford, losses of some
    Canadian banks)
  • Risks of contagion via conglomerate networks (CL
    Financial 8 of the 10 largest conglomerates
    listed on regional stock exchanges are financial)
  • Lack of timely information reporting by nonbanks,
    which are a large of financial assets in
    Jamaica and Tdad Tobago

10
We cannot assess the extent of the economic
impact on the Caribbean until the hurricane passes
  • Tourist bookings are down, but how much worse
    they will become is unclear
  • Investment in the tourism sector continues to
    fall
  • The future trend in commodity prices is very
    unclear, even in the near term
  • There will be foreign reserve losses in 2009, but
    the extent depends on the unknown factors

11
Caribbean govt responses
  • Support for export producers and providers of
    tourism service
  • Spending designed to protect living conditions of
    the most vulnerable
  • Intervention of financial institutions

12
Limitations on govt responses
  • Because of the high import content of consumer
    and investment spending, any additional spending
    will result in an even greater loss of foreign
    exchange. Too low a level will imperil exchange
    rate stability
  • No Caribbean country is limited in its ability to
    intervene the financial sector, because that
    results in no expenditure, merely a switch in
    ownership of assets

13
What advice can an economist offer to businessmen?
  • Before you can begin to think about the future
    you have to survive the current global economic
    hurricane
  • It is too late to prepare (reduce debt, cut
    obligations, increase liquidity). You are
    constrained to craft your survival strategy with
    what you have
  • Eliminate any spending or obligations that are
    not vital to survival as soon as that may be done
    without prejudice
  • Re-evaluate the situation continuously the
    longer the leading economies take to get back on
    their feet the more drastic survival strategies
    will need to be

14
It is becoming clear what activities are socially
desirable and environmentally necessary for the
future
  • Human development health, education, sanitation
  • Alternative energy
  • Energy conservation
  • Recycling and reusable materials
  • Cultural heritage development
  • Public transportation, especially rail buses
  • Etc

15
But major social, economic and psychological
changes are not in place
  • The pricing and distribution system does not
    favour recycling, alternative energy or
    conservation
  • The global investment in the infrastructure of
    fossil fuel production, distribution and use is
    enormous. Alternative energy has no chance of
    being competitive
  • Public preferences for wasteful and
    environmentally destructive practices are well
    entrenched

16
Offering unrealistic advice will not make things
better
  • Focus on getting past the hurricane alive,
    however long it lasts
  • Stick to what you know best, or something very
    close to it
  • If you decide to look to activities for the
    future, secure heavy govt backing
  • Even so, take no new initiatives until the
    hurricane passes, unless you have enough of your
    own resources to survive the storm and make new
    investment
About PowerShow.com