After an economically troubled 2011, most people are hoping for a more productive 2012, with an emphasis on economic recovery and growth.

World Bank projections suggest that the global economy will grow a mere 3.4 per cent during the course of the year. In the recently released Global Economic Prospects (GEP) 2012, the World Bank forecasts a 5.4 per cent growth rate for developing countries and 1.4 per cent for developed countries. The Eurozone area is predicted to see -0.3 per cent, while in Latin America and the Caribbean (LAC), growth is estimated to be 3.6 per cent.

While the idea of global growth in the wake of the 2008-2009 global financial crisis is welcome, it should be noted that these new projections by the Bank are actually lower than its June estimates of 6.2 and 2.7 per cent, in developing and developed economies respectively. (It had actually predicted a 1.9 per cent growth rate for the Euro Area.)

In Trinidad and Tobago, the Central Bank projects a 1.4 per cent economic growth rate for 2012, after it estimated the economy contracted 1.4 per cent – possibly more – in 2011.

The GEP cites the Euro Area debt problems and weakening growth in several big emerging economies, like China, are dimming global growth prospects.

"Developing countries should prepare for further downside risks," says the report.

"Developing countries need to evaluate their vulnerabilities and prepare for further shocks, while there is still time," said Justin Yifu Lin, chief economist and senior vice president for Development Economics at the World Bank.

The GEP report states that developing countries have less fiscal and monetary space for remedial measures than they did in 2008/09.

As a result, their ability to respond may be constrained if international finance dries up and global conditions deteriorate sharply.

For LAC countries, these problems, and a policy-induced deceleration in domestic demand are weighing on growth prospects.

According to Augusto de la Torre, World Bank chief economist for Latin America and the Caribbean, it is still unclear how much the current Euro-zone debt crisis will impact the region.

"If Chinese growth remains strong and global liquidity and commodity prices remain relatively high, the region should continue to enjoy solid if somewhat slower growth. Sustaining and raising long-term growth will require continued emphasis on investment and productivity enhancing policies," he said.

"In a catastrophic scenario where elevated risk aversion shuts down credit and stalls capital inflows to emerging markets, China becomes unable to fully offset a decline in its exports, and commodity prices drop, LAC would need to activate all available shock absorbers to protect its hard-won social gains," he added.

Finance Minister Winston Dookeran cites sustainability as a fundamental element for developing countries to weather economic storms.

"As a country, we must find new ways to attain sustainability, which, in my view, is the capacity to adjust, the ability to cope and the existence of buffers. These three broad areas will define the sustainability of many emerging markets, especially small emerging markets like ours," he said in an address at the ceremonial handover of Citi's 2011-2012 Investment Guide at Chaud Resturant, Queen's Park West, Port of Spain last Monday.

With regard to buffers, Dookeran said Trinidad and Tobago was fortunate to have established the Heritage and Stabilisation Fund, which he says is an important confidence builder. The value of the fund is an estimated US$4 billion.

Dookeran added that as international financial institutions begin to search for new ways of protecting small economies, Trinidad and Tobago has taken the initiative to encourage the International Monetary Fund to relook the concept of buffers in small economies so that their inadequacies can be addressed.

President of the Trinidad and Tobago Chamber of Industry and Commerce Andrew Sabga told reporters at the 3rd Biennial Small and Medium Enterprise Conference at the Hilton Trinidad last Wednesday that developing economies like LAC countries need to understand that their markets are influenced by global happenings.

"(To say) we are insulated from global events couldn't be further from the truth. We (local manufacturers) sell into many markets dependent on travellers from (developed) regions, so we definitely need to be concerned with what happens in large international markets. How we insulate ourselves is by going to new markets besides the traditional North America and Europe. We should be looking to Brazil, India, China and Central America," he said.

Financial analyst Jason Julien, who was also at the conference, said while Trinidad and Tobago was very fortunate to have buffers like the Heritage and Stabilisation Fund, as well as enough foreign reserves to cover import expenses for almost a year, other Caribbean islands were not so lucky, and this will have a trickle-down effect on Trinidad and Tobago, particularly for the manufacturing industry.

"In the context of the world, the Caribbean will be impacted negatively; local manufacturers export a lot to the Eastern Caribbean, Barbados and Jamaica. When those countries begin to feel the reality of slow tourist arrivals, less donations and grants from the European Union, it's going to affect manufacturers because those who would have normally bought from them may not have as much disposable income to do that.

Regional governments will also be challenged with what they can afford.

Here, the energy sector should be alright, and the government will have programmes to stimulate economic growth. I think the economy as a whole should be fine because we have enough of a balance sheet to withstand the shocks, but we need to be very cautious with what we do from this point on in managing that, and also how we create growth and find new sources of foreign exchange," he said.