Wednesday, 4 September 2013

Ripple effect – Region should pay attention to crisis in Syria, China’s slowdown

AS if Grenada and the Caribbean do not have enough economic challenges on their plate, two pieces of information making the rounds quite recently ought to be enough to make us very wary of what could unfold in the coming weeks.

The first is the likelihood of the United States of America (USA) and its allies moving to punish Syria for the alleged use of chemical weapons in the raging civil war there. If that does happen, then the world will witness a spike in oil prices beyond the current US$106 a barrel, which would make life difficult for Grenada and other importing countries in both our region and in the wider world.

The other matter relates to the speculation that the economic slowdown in China could have ripple effects in the wider region and even in our backyard. Again, such an eventuality would make life uncomfortable for everyone, including our major trading partners in North America – a situation that could very well trickle down to us.

It is clear that conflict in Syria, which has been taking place for more than two years, will trigger a reaction from the big powers within the United Nations. And despite the protests from China and Russia, the United States and its European allies are firmly of the view that the status quo in Syria has to change. The alleged use of the chemical weapons has brought the inevitable closer to reality, as well as the implications from whatever actions are taken.

The Gulf War of the early 1990s led to a hike in oil prices that not only caused inflation to spike in some Caribbean countries, but forced them to dig deeper into their pockets to find money to pay for the higher-priced oil imports.

Given the instability in the Middle East, the countries of the Caribbean have to fast-track their renewable energy programmes so that eventually the time will come when the demand for fossil fuels is not as critical as is currently the case.

The effect of a slowdown in the economy of China won’t impact some Caribbean countries as greatly as it will others who have embraced that country as a significant trading partner. However, we will have to see how it affects the USA, which is a major trading partner for the region.

It is hoped therefore that the situation with Syria can be resolved without military intervention, since it won’t only be Syria but other players involved, and this could be troublesome for the entire region and the world.

While tourism-dominated economies like Barbados, Jamaica and the OECS have felt the pain from the recession in the North Atlantic economies, other economies like Guyana and Suriname have benefited from the increasing Chinese demand for commodities. Others in Latin America will also feel the effects since any fall in demand will impact on these countries.

Equally, it is hoped that the Chinese economy remains stable and rides through the current storms.

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