Region forced to chose between inflation and growth

Published: Thursday June 12, 2008

Some countries choose to surrender growth and employment for inflation, said Desmond Thomas, senior country economist with the Inter-American Development Bank (IDB).

He asked whether a country should give up growth and employment for inflation.

“For some countries, the answer is, ‘yes.’ In some other countries, the answer is, ‘no.’”

He spoke of the international credit ratings agency, Fitch Ratings Ltd, which has expressed concern about Suriname’s inflation rate, as the country is growing at seven per cent per annum.

“The bad news comes with some good news,” Thomas said. “And that makes it more complicated to address. It is a question of priorities.”

Thomas suggested that country officials should pay attention to basic macro-economic management.

Energy, inflation in

the Caribbean

Thomas said while there is a problem of energy prices, they are not directly hitting the region.

He said inflation across the region is reasonable, but the experiences of different countries are not the same.

“So it is really hard to generalise across this region about what is driving inflation.”

Carl Ross, managing director, Oppenheimer and Co, Inc, a full-service investment firm, said the ability of regional central banks to fight inflation with monetary policies is very limited.

Ross said inflation in the Caribbean is a demand-side phenomenon and that some inflation in the Caribbean is coming from such domestic factors as building construction.

Ross said it was “shocking” to him that there isn’t more investment in agriculture, given high food prices.

He said there are numerous barriers to entry in the agriculture sector, but figuring out how to get credit to the agriculture sector and how to de-regulate the agriculture sector so farmers can grow more food, are a start.

Ross also said he could not understand why the region was not taking “the global lead” in alternative energy.

Gervase Warner, executive chairman, Neal and Massy Energy Ltd, said oil prices are racing through the economies of Barbados, Jamaica, and Grenada, so much so that some are embracing such new policies as Venezuela’s Petrovesa and PetroCaribe, which he described as “a crazy policy” that’s “hugely unsustainable.”


Source: Trinidad Guardian Newspapers
http://www.guardian.co.tt/business3.html