The World Bank says that Caribbean and Latin America have been holding steady, despite tighter external condition. This week the Washington-based financial institution said while international investors shift their focus back to advanced economies, particularly the United States, as a result of monetary policy normalization, emerging economies face much tighter financial conditions. But it said that the impact of this reversal in capital flows is less significant for Latin America and the Caribbean “thanks to its new reliance on more stable international flows.” According to the latest sem-iannual report by the World Bank’s Office of the Chief Economist for the region, during the past decade, Foreign Direct Investment (FDI) and remittances have come to represent a “far larger share of net flows into the region than the more volatile non-FDI flows.” According to the report, external factors, particularly lower prices of industrial metals, and increased uncertainty over China’s growth are taking a toll on the region’s growth, which is expected to be at 2.3 percent for 2014. The report also warned that countries in the region that rely heavily on remittances, face even more daunting challenges. To start with, report urges that they focus on innovative policies to encourage households to use at least part of their remittance income toward asset building—particularly through investments in health, education, and housing. It has been recommended that those countries put a premium on the hard task of continuously improving their domestic enabling environments to attract both their own workers and FDI, and then harness the productivity benefits of the efficient interaction between the two.
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