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Mr. Simon Cueva, Mr. Stephen Tokarick, Mr. Erik J. Lundback, Ms. Janet Gale Stotsky, and Mr. Samuel P. Itam

Abstract

This paper focuses on the independent states that are full members of the Caribbean Community. It provides background information on recent developments in the Caribbean region and lays out the principal policy issues that countries will need to address in the period ahead. The Caribbean countries face several common problems and must deal with similar economic policy issues. Consequently, concentrating on the regional perspective permits a comparison of the individual responses to similar problems. The regional view throws light on the countries' movement toward convergence. The economic prospects for the region are generally satisfactory over the medium term, but the projections depend importantly on the resolve of governments to pursue appropriate policies, as well as favorable developments in the rest of the world. The relatively favorable outlook for the region is not without risks, such as a slowdown in growth in the major trading partner countries or a term of trade shock.

Mr. Simon Cueva, Mr. Stephen Tokarick, Mr. Erik J. Lundback, Ms. Janet Gale Stotsky, and Mr. Samuel P. Itam

countries of about 2½ percent. However, over the medium term, the inflation differential between the Caribbean region and its trading partners is expected to narrow to only 0.6 percentage point in 2005 from about 1.8 percentage points in 2000. Inflation in the OECS countries is expected to fall below 2 percent. The overall fiscal position of the region could improve over the medium term, as a number of countries take measures to strengthen the public finances. The fiscal improvements are largely dependent on the acceleration of economic growth and expenditure restraint

Mr. Simon Cueva, Mr. Stephen Tokarick, Mr. Erik J. Lundback, Ms. Janet Gale Stotsky, and Mr. Samuel P. Itam

single market will proceed, given the wide disparity in per capita incomes across countries in the region and the fact that countries differ markedly regarding their stage of development. For example, the size of fiscal deficits differs across countries in the region, and these differences are particularly sharp in some cases—for example, Trinidad and Tobago compared with Jamaica and Suriname. Also, average inflation in the OECS countries is quite low—about 2¼ percent in 1999—while inflation was 6 percent in Jamaica and 99 percent in Suriname. In these cases, issues